North American stocks opened mixed Tuesday, as market players on both sides of the border take in a handful of earnings reports and the latest international trade numbers. Both Thomson Reuters and Cenovus Energy were under heavy selling pressure on the TSX after their latest numbers disappointed the Street.
Meanwhile, an uptick in bond yields is keeping traders nervous ahead of fresh U.S. inflation figures on Thursday. In Canada,
Canada posted a surprise trade deficit of C$137 million in December, as imports rose and exports fell from November, Statistics Canada said on Tuesday. Analysts surveyed by Reuters had on average forecast a surplus of C$2.50 billion in December.
Markets largely shrugged off the data, as did some economists.
“While goods trade was in deficit in December, there are two reasons to expect it to move back into surplus very soon,” said Stephen Brown, senior Canada economist for Capital Economics. “First, the sharp rise in oil prices so far this year will cause a renewed pick-up in energy export values. Second, as motor vehicle export volumes were still 13% below their pre-pandemic level in December, whereas imports were just 4% lower, there seems to be greater scope for exports to outpace imports as motor vehicle production rebounds further.”
Meanwhile, the U.S. trade deficit increased in December as imports surged amid the restocking of shelves by businesses, culminating in the largest shortfall on record in 2021.
The earnings reports that have been released so far today cover several different sectors and have been mixed.
Drugmaker Pfizer fell 4% in early trading after its full-year sales forecast for its COVID-19 vaccine and antiviral pills fell short of Wall Street estimates.
Thomson Reuters shares were down 5% in early trading after the company missed fourth-quarter earnings forecasts. Adjusted earnings fell to 43 US cents per share per share from 54 cents. Analysts, on average, expected operating earnings of 46 cents per share. Revenues, however, grew 6% in the quarter to $1.71 billion, ahead of analyst expectations.
Cenovus Energy posted a wider quarterly loss, primarily due to non-cash impairment of C$1.9 billion in the U.S. manufacturing segment, sending its U.S.-listed shares down 6% in early trade.
More positively, TMX Group reported adjusted profits of $1.77 per diluted share, 5 cents better than forecast and up about 22 per cent from a year earlier. Revenues were $252.4 million, modestly beating analysts forecasts of $251.4 million. The company also boosted its quarterly dividend eight per cent. Shares were up nearly 1%.
Canada’s main stock index edged lower on Monday, consolidating last week’s sharp gains, as declines for technology and industrial shares offset gains for the materials group. Wall Street ended lower as well, as investors digested recent quarterly results from Facebook owner Meta Platforms and other megacaps, while Peloton jumped following reports of interest from potential buyers, including Amazon.
Stocks have had a rough start to the year, with concerns around a more aggressive policy tightening by the U.S. Federal Reserve, geopolitical tensions in Ukraine and a mixed bag of results from Big Tech names weighing on the major indexes.
All eyes are on the U.S. consumer prices data, set to be released on Thursday, after stunningly strong U.S. labor data last week put extra focus on inflation. The numbers are forecast at a four-decade high 7.3%.
Of the 281 companies in the S&P 500 that reported earnings as of Monday, 78.3% beat analysts’ profit expectations, compared with an average of 84% over the past four quarters, according to Refinitiv data.
Equities
Commodities
Oil slipped to under US$90 a barrel ahead of the resumption of indirect talks between the United States and Iran, which could revive an international nuclear agreement and allow more oil exports from the OPEC producer.
A deal could return more than 1 million barrels per day (bpd) of Iranian oil, equating to more than 1% of global supply, to the market. The nuclear talks are due to resume in Vienna on Tuesday.
Eight rounds of indirect talks between Tehran and Washington since April have yet to result in an agreement on a resumption of the 2015 nuclear pact, with differences remaining over the speed and scope of the lifting of sanctions.
“Exports could resume swiftly if a nuclear deal is reached,” said Tamas Varga of broker PVM. “But it is a big ‘if’. The re-emergence of Iranian barrels is only a possibility at this stage.”
Brent crude was down $2.02, or 2.2%, at $90.67 a barrel by 1110 GMT after hitting a seven-year high of $94 on Monday. U.S. West Texas Intermediate crude fell $1.60, or 1.8%, to $89.72.
Currencies and bonds
The Canadian dollar is down about a quarter of a cent against the greenback this morning, reflecting the drop in energy prices.
Still, “the CAD has not fully reflected the recent gains in crude so the impact of weaker prices is dubious,” Scotiabank forex strategists said in a note this morning. “Our correlation screen shows the CAD not really correlating with anything much in a meaningful way at the moment (our rolling 22-day window correlation study shows just a 30% correlation with WTI) but weak crude may still represent a minor headwind for the CAD in the short run at least,” the strategists said.
U.S. and Canadian bond yields are up this morning, with the U.S. 10-year currently up about 2 basis points at 1.943%.
“The big news overnight was not in the data since there weren’t any economic releases (outside of real household expenditures in Japan, which fell 0.2% YoY in December versus consensus views of 0%), but rather in market pricing and heightened inflation concerns and fears that central banks will carry through on their hawkish messaging,” economist David Rosenberg wrote in his morning Breakfast with Dave report Tuesday. “At one point overnight, the yield on the 10-year Treasury note touched 1.95% (now at 1.94%). A 2-handle now seems like a forgone conclusion.”
Other corporate news
Peloton Interactive Inc declined 7.2% after saying it would replace its chief executive officer, cut jobs and appoint new board members as the company wrestles with waning demand for its at-home fitness equipment.
Meta Platforms shares were down another 1.7% in premarket trading Tuesday after billionaire investor Peter Thiel decided to step down from the company’s board.
Nvidia Corp slipped 1.6% after SoftBank Group Corp shelved its blockbuster sale of Arm Ltd to the chipmaker in a deal valued at up to $80 billion, citing regulatory hurdles.
General Motors Co fell 4.8% after Morgan Stanley downgraded the automaker’s stock to “equal-weight” from “overweight.”
Harley-Davidson Inc reported quarterly revenue on Tuesday that beat analysts’ estimates, as the motor cycle maker’s strategy to pivot to selling more expensive touring and cruiser bikes paid off. The company’s shares were up 6.8% at $38.59 in premarket trading.
BP’s profits hit their highest in eight years in 2021, lifted by soaring gas and oil prices, as the company boosted share repurchases and accelerated plans to cut emissions with increased spending on low carbon energy.
Other earnings include: Absolute Software Corp.; Finning International Inc.; First Capital Realty Inc.; Intact Financial Corp.; International Petroleum Corp; Peloton Interactive Inc.; Pfizer Inc.; S&P Global Inc.; Silvercorp Metals Inc.; Stingray Digital Group Inc.; Tucows Inc.; WildBrain Ltd.
Economic news
Canada posted a surprise trade deficit of C$137 million in December, as imports rose and exports fell from November, Statistics Canada said on Tuesday. Analysts surveyed by Reuters had on average forecast a surplus of C$2.50 billion in December.
The Commerce Department said on Tuesday that the U.S. trade deficit rose 1.8% to $80.7 billion in December. Data for November was revised lower to show a $79.3 billion gap instead of the previously reported $80.2 billion. Economists polled by Reuters had forecast a $83.0 billion deficit. The deficit jumped 27.0% to $859.1 billion in 2021. That was the highest on record and followed a $676.7 billion shortfall in 2020.
With files from Reuters