Canada’s main stock index was treading water at Thursday’s opening bell as the global rally takes a breather and weakness in energy shares offsets gains in the materials sector. On Wall Street, key indexes started in the red with declines by Walmart and Cisco hitting sentiment.
At 9:30 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was down 4.56 points, or 0.02 per cent, at 20,053.33.
In the U.S., the Dow Jones Industrial Average fell 123.18 points, or 0.35 per cent, at the open to 34,868.03.
The S&P 500 opened lower by 5.80 points, or 0.13 per cent, at 4,497.08, while the Nasdaq Composite dropped 36.96 points, or 0.26 per cent, to 14,066.88 at the opening bell.
Easing inflation concerns and expectations of peak interest rates have helped fuel November’s rally. This week has seen encouraging reports from the U.S. and Britain suggesting tamer inflationary pressures. Markets are now widely expecting the U.S. Federal Reserve to hold rates unchanged at its December meeting and speculation is mounting about the timing of potential rate cuts.
“Market optimism appears to be cooling off after a bumper period of gains for equity markets, built on growing expectations that the Fed are finished with their historic tightening process,” Joshua Mahony, chief market analyst with Scope Markets, said.
“With markets now pricing a mere 1-per-cent chance of another hike, markets are now more concerned with the timing of the first rate cut and the pace of easing.”
He said, as things stand now, markets are expecting 100 basis points of rate cuts next year, with precious metals and cryptocurrencies the early movers on the premise of a more advantageous macro environment.
On the corporate side, shares of Cisco Systems were down about 11 per cent in early trading on the Nasdaq after the company cut its full-year revenue and profit forecasts. Cisco said it saw “a slowdown of new product orders in the first quarter ... and believes the primary reason is that customers are currently focused on installing and implementing products in their environments,” Reuters reported.
For the full year, Cisco now expects revenue between US$53.8-billion and US$55-billion, and adjusted per-share earnings in the range of US$3.87 to US$3.93. Previously Cisco forecast annual revenue of US$57-billion to US$58.2-billion, and adjusted per-share earnings of US$4.01 to US$4.08.
Thursday morning, U.S. retail earnings continued to roll in.
Ahead of the opening bell, Walmart hiked its full-year sales and profit forecast for the second consecutive quarter. Walmart now expects fiscal 2024 earnings per share of between US$6.40 and US$6.48, up from its prior forecast of US$6.36 to US$6.46. The retailer expects comparable sales for the full year rising in a range of 5 per cent to 5.5 per cent, compared with an increase of between 4 per cent and 4.5 per cent estimated previously. However, shares were down more than 6 per cent in morning trading after company executives offered cautious comments on the outlook for consumer spending.
Overseas, the pan-European STOXX 600 was down 0.36 per cent by afternoon. Britain’s FTSE 100 slid 0.58 per cent. Germany’s DAX added 0.64 per cent while France’s CAC 40 slid 0.21 per cent.
In Asia, Japan’s Nikkei fell 0.28 per cent. Hong Kong’s Hang Seng lost 1.36 per cent.
Crude prices saw early losses, continuing the previous session’s declines, after new figures showed a bigger-than-forecast build in U.S. inventories.
The day range on Brent was US$80.28 to US$80.98 in the early premarket period. The range on West Texas Intermediate was US$75.67 to US$76.61. Both benchmarks lost more than 1 per cent on Wednesday.
“The market has been grappling with conflicting messages over the past few weeks,” SPI Asset Management’s Stephen Innes said.
“OPEC+ is talking up tight markets on China demand. At the same time, the International Energy Agency said that global oil markets will not be as tight as expected this quarter, as supply had outpaced upgrades to demand.”
Sentiment took a hit after U.S. government figures released on Wednesday showed U.S. crude inventories rose by 3.6 million barrels last week to 421.9 million barrels. Analysts polled by Reuters had forecast a smaller rise of 1.8 million barrels.
U.S. crude production held steady at a record 13.2 million barrels per day.
In other commodities, spot gold gained 0.4 per cent to US$1,966.41 per ounce by early Thursday morning. U.S. gold futures rose 0.3 per cent to US$1,969.10.
The Canadian dollar was slightly weaker alongside declining crude price and cautious broader market sentiment, while its U.S. counterpart was little changed against a group of world currencies.
The day range on the loonie was 72.91 US cents to 73.11 US cents in the predawn period. The Canadian dollar is down more than 1 per cent against the greenback for the year to date.
“Soft stocks and crude are minor constraints on the CAD in the short run but some improvement in short-term yield differentials in the CAD’s favour this week rather suggest scope for a little more strength in my opinion,” Shaun Osborne, chief FX strategist with Scotiabank, said.
On world markets, the U.S. dollar index, which weighs the greenback against a basket of currencies, was little changed at 104.40. The index has seen a volatile week, falling more than 1 per cent on Tuesday before rebounding 0.31 per cent on Wednesday.
The euro was up around 0.1 per cent at US$1.0857, as was the yen at 151.16, according to figure from Reuters. Against Britain’s pound, the dollar was flat at US$1.24085.
In bonds, the yield on the U.S. 10-year note was lower at 4.502 per cent ahead of the North American opening bell.
More company news
More electric vehicle charging stations are on the way as the Canada Infrastructure Bank says it has signed a second funding deal to expand fast-charging options. The federal Crown corporation says it will provide up to $210-million in loans to help Parkland Corp. expand its charging network by upwards of 2,000 fast-charging ports at as many as 400 sites. It’s CIB’s second major funding announcement for charging stations, after it provided a $220 million loan in April to Flo Inc. to help it build more than 2,000 fast-charging ports across Canada by 2027. -The Canadian Press
The union representing more than 1,200 workers at 17 No Frills grocery stores in Ontario has set a strike deadline of 12:01 a.m. on Monday. Unifor says contract talks are ongoing, but that workers are prepared to strike to back their demands. No Frills is the discount grocery banner owned by Loblaw Cos. Ltd. -The Canadian Press
Macy’s on Thursday reported an improvement in margins and a lower-than-expected drop in quarterly sales, sending its shares 10-per-cent higher in premarket trading. The Bloomingdale parent said its gross margins improved 160 basis points in the third quarter due to lower markdowns within the Macy’s brand, as well as easing freight charges. The U.S. department store operator’s net sales fell 7.1 per cent to $4.86 billion in the third quarter ended Oct. 28, while analysts’ had estimated a 7.9-per-cent drop to $4.82 billion, according to LSEG data. -Reuters
Canadian housing starts (8:15 a.m. ET)
Initial jobless claims (8:30 a.m. ET)
With Reuters and The Canadian Press