U.S. and Canadian stock futures are pointing to a rebound at the open Thursday as corporate giants report better-than-expected results after a steep slide a day earlier put several indexes, including the TSX and Nasdaq, in correction territory and wiped out the year’s gains for the Dow and S&P 500.
A sharp decline in highly valued technology and marijuana stocks and recent weaker corporate earnings have led to a bruising month of October.
Earnings will again be the focus on Thursday as a slew of corporate giants release results, including Google’s Alphabet, Amazon, Twitter, Atco, Maple Leaf Foods and Shaw Communications.
Markets are getting a boost Thursday helped by strong quarterly results reports from Comcast, Microsoft and electric carmaker Tesla.
Microsoft jumped 2.3 per cent in premarket trading after topping consensus estimates for both revenue and profit, helped by strong demand for its Azure cloud computing and Office 365 software products.
Tesla surged 11 per cent after the electric carmaker made good on billionaire Chief Executive Elon Musk’s promise it would yield a net profit in the quarter, encouraging hopes it will not have to raise more capital soon.
Other results were mixed. Maple Leaf’s profit fell 29 per cent on low pork prices, Teck Resources earnings fell as commodity prices slipped and Twitter reported a larger-than-expected decline in monthly users but its revenue and profit was ahead of Wall Street estimates though as advertising sales surged 29 per cent. Twitter’s shares jumped 13.2 per cent in premarket trading.
Shares of Advanced Micro Devices plunged 20.2 per cent after the chipmaker forecast fourth-quarter revenue below estimates in its own results release after the bell on Wednesday. That was countered by profit beats for Ford and Visa.
Wednesday’s sharp declines saw the TSX suffer its biggest one-day percentage drop in three years as it fell 376 points and is now down 8 per cent for the year.
The Dow fell 608 points, erasing its gains for this year, the S&P was off 3 per cent and also turned negative for the year. The Nasdaq lost 4.4 per cent and entered correction territory. It’s down 11.7 per cent in October.
Overseas, Europe attempted a rebound on Thursday after Wall Street’s worst day since 2011 and heavy losses in Asia put global stocks firmly on course for their worst month since the financial crisis.
It wasn’t a sunny picture by any means. Germany’s Dax hit a near two-year low and London’s FTSE and Paris’ CAC 40 both brushed 1-1/2 year lows early on, but a semblance of stability was emerging.
The pan-European STOXX 600 was almost back at level pegging having opened down almost 1 per cent and after Japan’s Nikkei had slumped 3.5 per cent overnight. Britain’s FTSE was up 0.12 per cent, Germany’s DAX gained 0.36 per cent and France’s CAC added 1.33 per cent.
“The markets have been acting like classic flight-to-safety markets,” said London & Capital’s head of fixed income Sanjay Joshi, pointing to the slump in stocks and rally in safer bonds and currencies.
Currency dealers were also cautiously reversing out of Swiss franc and Japanese yen safety trades and Italian and Spanish bonds made ground as traders waited to see what message the European Central Bank delivers at its meeting later.
“The worst thing the ECB could do would be to come out with a hawkish statement considering the situation we have at the moment.”
Most economists expect ECB President Mario Draghi to say the bank will stick to plans to end stimulus this year. But it will be the signal he sends about market volatility and concerns around Italy, his homeland, that could be most crucial.
Heavyweight investors have become increasingly nervous about lofty stock prices, faster rate hikes in the United States and an ongoing Sino-U.S. trade war that threatens to hurt world growth.
Almost 60 per cent of the 2,767 stocks in MSCI’s global equity index are now in ‘bear market’ territory -- down 20 per cent or more from their most recent peaks.
More woes in Asia overnight had seen the global wipeout on the MSCI World since January near US$7-trillion. Pan Asia-Pacific shares skidded more than 2 per cent while Japan’s Nikkei tumbled as much as 4 per cent to a six-month low.
The one relief was that Chinese shares managed to close in the black having dropped as much as 2.5 percent at one point , as fresh government support measures failed to ease worries about high leverage and the tariff war with the U.S.
Commodities
Oil prices steadied on Thursday, recovering from an early sell-off after Asian and European stock markets plunged in the wake of Wall Street’s biggest daily decline since 2011.
Brent crude oil fell 82 cents, or 1.1 per cent, to a low of US$75.35 before recovering to trade around US$76.32, up 15 cents. The global benchmark has lost more than US$10 a barrel since hitting a high of US$86.74 on Oct. 3.
U.S. light crude was unchanged at US$66.82 after touching an intraday low of US$65.99, down 83 cents.
“The market looks negative with lower numbers likely,” said Robin Bieber, technical analyst at London brokerage PVM Oil. He added that he expected “spirited rallies,” which he would see as selling opportunities.
City Index market analyst Fiona Cincotta said factors outside the oil market were now leading sentiment.
“Fear and anxiety about the global economy are currently playing a bigger role in the oil price than the actual fundamentals of supply and demand,” she said.
Gold prices inched lower on Thursday, with some investors taking advantage of a recent surge in prices to lock in profits.
Spot gold was down 0.1 per cent at US$1,232.08 an ounce. On Tuesday it hit a more than three-month high of US$1,239.68 as a global stock market sell-off spurred interest in the metal, which is considered a safer store of value during times of political and financial uncertainty.
U.S. gold futures were up 0.3 per cent at US$1,234.7 an ounce.
“Gold is pausing for a breath and is probably consolidating for the next possible move higher. Some speculative investors would be in a position to take profit,” said Mitsubishi analyst Jonathan Butler.
“It is running into some resistance around US$1,240. The next significant level is the US$1,250 psychological barrier,” he added.
Gold prices have gained more than 3 per cent so far this month, on track to break a six month losing streak, the length of which was last seen in the August 1996-January 1997 period.
Currencies and bonds
The Canadian dollar was flat at 76.63 cents US in trading early Thursday, a day after the Bank of Canada raised interest rates by a quarter of a percentage point and suggested further hikes were on the table.
“After the hawkish BoC statement yesterday, our rates strategists note there may be some upside risks to their current forecast of two hikes in 2019, though also note that they have less positive profile for consumption than the BoC,” RBC wrote in a note.
In foreign exchange markets, the euro clawed its way back up to US$1.14, having breached a long standing bulwark of US$1.1430.
Against a basket of currencies, the dollar eased from near a nine-week peak to 96.296 and for the first time in days it was barely budged against the safety first Japanese yen at 112.25 yen.
The U.S. 10-year Treasury yield was up slightly at 3.137 per cent. The Canada 10-year bond yield also edged higher to 2.457 per cent.
Stocks to watch
Marijuana stocks on the TSX could continue to get hit Thursday as investors shy away from the sector after legalization came into effect. One week after legalization, Canada’s major cannabis ETF has hit a rough patch, experiencing some of its largest daily outflows to date as the industry gets slammed by a broad-based sell-off. As of Tuesday’s close, investors have pulled a net $40-million from the Horizons Marijuana Life Sciences Index ETF (HMMJ) over the five trading days since Canada legalized cannabis for recreational use, according to Bloomberg data.
Canada’s Shopify Inc. reported a 58 per cent jump in revenue on Thursday as it benefited from growth in its subscription and merchant segments. The company, which helps e-commerce companies build their online stores, said net loss widened to $23.2-million, or 22 cents per share, in the third quarter ended Sept. 30, from $9.4-million, or 9 cents per share, a year earlier. Revenue rose to $270.1-million from $171.5-million. Its stock on the NYSE rose 3.9 per cent in premarket trading.
Twitter Inc. posted revenue and profit ahead of Wall Street estimates on Thursday, as higher advertising sales offset a drop in monthly users to push the company’s shares up nearly 12 per cent before the opening bell. Quarterly advertising revenue jumped 29 per cent from a year earlier to US$650-million, boosted by advertiser interest in broadcasts from media companies including Live Nation Entertainment, Major League Baseball and Major League Soccer.
Maple Leaf Foods Inc., one of Canada’s biggest pork processors, posted a quarterly profit that missed analysts’ estimates, hurt by lower hog prices and higher investments in its flagship brands. The company’s sales fell 3.7 percent to $874.8-million, as the drop in fresh pork prices offset growth in sustainable meat and plant-based protein products. Analysts on average had expected sales of $901.1-million.
Diversified miner Teck Resources Ltd. reported a near 23 per cent drop in third-quarter adjusted earnings on Thursday as prices for the Canadian company’s main products fell in the quarter. Teck, the world’s second-biggest exporter of steel-making coal, said adjusted profit fell to $466-million ($357.6-million), or 0.81 per share, during July-September, from $605-million, or $1.05 per share, a year earlier.
Canadian oil and gas producer Husky Energy Inc. reported a bigger quarterly profit on Thursday, boosted by higher crude oil prices. Net income rose to $545-million, in the third quarter ended Sept. 30, from $136-million, a year earlier. The company’s production in the reported quarter decreased to 297 million barrels of oil equivalent per day (boe/d) from 318 million boe/d. Last week, Husky made a formal offer to buy MEG Energy Corp days after making a hostile bid for $6.4-billion, to become an integrated oil company having production and refining capabilities. MEG had rejected Husky’s formal offer.
American Airlines quarterly profit nearly halved on Thursday, hurt by higher fuel costs and the impact of Hurricane Florence that forced it to cancel about 2,100 flights in September. The company said it would cut capacity, cancel loss-making routes and delay taking delivery of new aircraft to cut costs, but stuck to its full-year profit forecast of US$4.50 to US$5.00 per share. Shares of the company rose 5.1 per cent in volatile trading before the bell.
Southwest Airlines is reporting profits rose more than 16 per cent during the third quarter as it booked more passengers on more flights. The company earned US$615-million, or US$1.08 per share, beating estimates by 2 cents, according to a survey by Zacks Investment Research. However, its shares fell 7 per cent in premarket trading.
A big jump in U.S. medicine sales, particularly for its key cancer drug, helped Merck & Co. swing to a US$2-billion profit from a small loss a year earlier due to large one-time charges. Its shares rose 0.3 per cent in premarket trading.
Celgene Corp. reported a better-than-expected third-quarter profit as sales of psoriasis drug Otezla and its flagship cancer medicine Revlimid surged, and the biotech company raised its full-year revenue forecast. Sales of Otezla rose 40.3 per cent to US$432-million in the third quarter, well above of the average analyst estimate of US$383.31-million, according to Refinitiv data. Sales of Celgene’s blockbuster Revlimid, which treats the blood cancer multiple myeloma, rose nearly 18 per cent to US$2.45-billion, but slightly below analysts’ estimates of US$2.47-billion. Celgene raised its 2018 forecast for revenue to US$15.2-billion from US$15-billion. Excluding one-time items, Celgene earned US$2.29 per share in the quarter, above Wall Street expectations of US$2.22 per share. Its shares rose 3.3. per cent in premarket trading.
Earnings include: Aecon Group Inc.; Alphabet Inc.; Amazon.com Inc.; American Electric Power Company Inc.; Atco Ltd.; Atrium Mortgage Investment Corp.; Bristol-Myers Squibb Co.; CA Inc.; CME Group Inc.; Calfrac Well Services Ltd.; Canadian Utilities Ltd.; Celgene Corp.; Cerner Corp.; Comcast Corp.; ConocoPhillips; Constellation Software Inc.; Crescent Point Energy Corp.; Digital Realty Trust Inc.; Discover Financial Services; Eldorado Gold Corp.; Gilead Sciences Inc.; GoldMining Inc.; Hershey Co.; Husky Energy Inc.; Intel Corp.; Maple Leaf Foods Inc.; MedMen Enterprises Inc.; MEG Energy Corp.; Merck & Company Inc.; Newmont Mining Corp.; OceanaGold Corp.; Precision Drilling Corp.; Raytheon Co.; S&P Global Inc.; Shaw Communications Inc.; Sherwin-Williams Co.; Shopify Inc.; Simon Property Group Inc.; Southern Copper Corp.; Southwest Airlines Co.; Stryker Corp.; Teck Resources Ltd.; Twitter Inc.; Union Pacific Corp.; Valero Energy Corp.; Waste Management Inc.; Xcel Energy Inc.; Yamana Gold Inc.
Other reading: Thursday’s small-cap stocks to watch
Economic news
(8:30 a.m. ET) Canada’s Survey of Employment, Payrolls, and Hours for October.
(8:30 a.m. ET) U.S. initial jobless claims for week of Oct. 22. Estimate is 215,000, a rise of 5,000 from the previous week.
(8:30 a.m. ET) U.S. durable orders for September. Consensus is a decline of 1.0 per cent from August.
(8:30 a.m. ET) U.S. goods trade deficit for September. Consensus is US$75.1-billion, down from US$75.5-billion in August.
(10 a.m. ET) U.S. pending home sales index for September. Consensus is a drop of 0.1 per cent from the previous month.
With files from Reuters