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Equities
Canada’s main stock index fell at the open Tuesday as mining stocks weighed and global sentiment remained fragile. On Wall Street, tech shares were still under pressure after the previous session’s wild swings, with investors looking ahead to the Federal Reserve’s policy decision tomorrow.
At 9:30 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was down 228.74 points, or 1.11 per cent, at 20,342.56.
In the U.S., the Dow Jones Industrial Average fell 177.86 points, or 0.52 per cent, at the open to 34,186.64.
The S&P 500 opened lower by 43.49 points, or 0.99 per cent, at 4,366.64, while the Nasdaq Composite dropped 244.26 points, or 1.76 per cent, to 13,610.87 at the opening bell.
The Federal Reserve’s policy meeting this week continues to be a dominating factor for markets.
“Fed’s goal is to fight back the inflation crisis, and not to trigger a renewed financial crisis,” Ipek Ozkardeskaya, senior analyst with Swissquote, said. “And the Fed can’t afford to trigger a financial crisis when inflation is so high.
“As such, the recent market turmoil will certainly soften the Fed’s tone, or at least prevent the Fed from sounding too hawkish.”
She said she still expects the central bank to continue tapering bond purchases and will likely go ahead with its first rate hike in March but “the officials may sound be more gentle on the balance sheet reduction strategy, and more.”
On this side of the border, the Bank of Canada’s policy decision is also due Wednesday with economists increasingly predicting that the central bank will deliver its first rate hike since October 2018.
On the corporate side, earnings season continues to gather pace. U.S. markets get results from Johnson & Johnson, General Electric and American Express on Tuesday. Microsoft releases results after the close.
In Canada, grocer Metro Inc. reported this morning. CN Rail releases results after the close of trading.
The Globe’s Susan Krashinsky Robertson reports that grocery store owner Metro Inc.’s profit increased by 8.6 per cent in the first quarter, as food and pharmacy sales continued to be strong and costs related to the COVID-19 pandemic decreased. The Montreal-based retailer reported net earnings of $207.7-million, or 85 cents per share in the 12 weeks ended Dec. 18, 2021, compared to $191.2-million or 76 cents per share in the same period the prior year. Metro shares were up modestly in Toronto shortly after the opening bell.
On Wall Street, shares of IBM were little changed after the company topped fourth-quarter revenue expectations, helped by its cloud and consulting businesses. Revenue rose 6.5 per cent to $16.7-billion, adjusted for the separation of the managed infrastructure services business. Analysts on average had expected US$15.96 billion, according to IBES data from Refinitiv.
Overseas, the pan-European STOXX 600 gained 0.76 per cent by afternoon. Britain’s FTSE 100 rose 0.87 per cent. Germany’s DAX and France’s CAC 40 gained 0.58 per cent and 0.95 per cent, respectively.
Wall Street’s volatility carried over to Asia. Japan’s Nikkei fell 1.66 per cent. Hong Kong’s Hang Seng lost 1.67 per cent.
Commodities
Crude prices were steady in early going as geopolitical tensions continue to raise supply concerns.
The day range on Brent is US$86.52 to US$87.61. The range on West Texas Intermediate is US$83.43 to US$84.55. Brent fell 1.8 per cent on Monday while WTI lost more than 2 per cent. Both benchmarks managed their best levels in seven years last week.
“There’s still a big issue on the supply side, with OPEC+ unable to even come close to monthly addition targets and it’s happening at a time of strong demand,” OANDA senior analyst Craig Erlam said.
“Not to mention the fact that tensions are seriously heightened between Russia and the West and an invasion of Ukraine is becoming an increasing possibility. When energy markets are already so tight, the additional risk premium should continue to support prices.”
On Monday, NATO said it was putting forces on standby and reinforcing eastern Europe with more ships and fighter jets, in what Russia denounced as Western “hysteria” in response to its build-up of troops on the Ukraine border, according to a Reuters report.
In the Middle East, Yemen’s Houthi movement, aligned with Iran, launched a missile attack at the United Arab Emirates on Monday that targeted a base hosting the U.S. military, but was thwarted by U.S.-built Patriot interceptors, U.S. and Emirati officials said.
Gold prices, meanwhile, slid as traders await the outcome of the Fed’s policy meeting.
Spot gold fell 0.4 per cent to US$1,836.06 per ounce by early Tuesday morning, while U.S. gold futures slipped 0.3 per cent to US$1,836.20.
Currencies
The Canadian dollar stabilized, helped by rising crude prices, while its U.S. counterpart edged up against a group of world currencies, nearing its best level in two weeks
The day range on the loonie is 78.99 US cents to 79.25 US cents. On Monday, the Canadian dollar fell to a two-week low as weak risk sentiment roiled the markets.
There were no major Canadian economic releases due on Tuesday. Investors are now waiting for the outcome of the Bank of Canada’s policy decision on Wednesday morning.
On world markets, the dollar index was 0.1 per cent higher at 96.02, just off its two-week high of 96.135 hit on Monday.
The euro was down 0.2% at 0848 GMT to $1.1300, trading just off its lowest since Dec. 20 touched on Monday, according to figures from Reuters.
In bonds, the yield on the U.S. 10-year note was higher at 1.789 per cent in the predawn period.
More company news
Johnson & Johnson on Tuesday forecast $3-billion-$3.5-billion in revenue for its COVID-19 vaccine this year, more than the $2.39-billion it generated in 2021 even as the drugmaker faces manufacturing issues and uneven demand.
General Electric Co forecast higher profit and higher free cash flow this year after reporting higher-than-expected earnings in the quarter through December.
Unilever unveiled plans to cut about 1,500 management jobs in a restructuring aimed at easing shareholders’ concerns after a failed takeover bid and reports an activist investor had built a stake in the consumer goods giant. The maker of Dove soap and Magnum ice cream, which employs about 149,000 people worldwide, said on Tuesday the revamp would create five product-focused divisions - beauty and wellbeing, personal care, home care, nutrition, and ice cream.
American Express Co exceeded Wall Street estimates for fourth-quarter profit on Tuesday as spending on its credit cards jumped to record levels. Net income came in at $1.7-billion, or $2.18 per share, compared with $1.44-billion, or $1.76 per share, a year earlier. Analysts on average were expecting a figure of $1.87 per share, according to Refinitiv IBES data.
Economic news
(9 a.m. ET) U.S. S&P Case-Shiller Home Price Index (20 city) for November.
(9 a.m. ET) U.S. FHFA House Price Index for November.
(10 a.m. ET) U.S. Conference Board Consumer Confidence Index for January.
Also: U.S. Fed meeting begins
With Reuters and The Canadian Press