Equities
Canada’s main stock index fell at Monday’s opening bell with materials stocks losing ground on the back of weaker metal prices. Wall Street’s key indexes also started in the red after Federal Reserve chair Jerome Powell again suggested that interest rates may not fall as quickly as markets had been expecting.
At 9:30 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was down 80.54 points, or 0.38 per cent, at 21,004.55.
In the U.S., the Dow Jones Industrial Average fell 107.65 points, or 0.28 per cent, at the open to 38,546.77. The S&P 500 opened lower by 1.42 points, or 0.03 per cent, at 4,957.19, while the Nasdaq Composite dropped 14.96 points, or 0.10 per cent, to 15,613.99 at the opening bell.
In an interview with CBS’ 60 Minutes, which aired Sunday, Mr. Powell said the central bank would be “prudent” in deciding when to cut rates. Last week, the bank held rates steady and indicated that a March cut wasn’t likely in the cards. Markets further pared bets on an early move after U.S. jobs numbers for January, released on Friday, proved much stronger than expected.
“Powell emphasized the overall strength of the [U.S.] economy, the robust labour market, and the downward trend in inflation,” Stephen Innes, managing partner with SPI Asset Management, said.
“He reiterated that the Fed is assessing the optimal timing to adjust its policy stance accordingly. Still, there is very little in the tea leaves to suggest the Fed is willing to cut rates beyond preventing to avoid passive tightening through the real-rate channel.”
Meanwhile, earnings from big corporate names continue to roll in. On Wall Street, McDonald’s reported on Monday morning. Ford Motor Co follows on Tuesday. In Canada, TMX Corp. reports after the close of trading today. Telecom giant BCE is set to release quarterly results on Thursday, followed by Telus on Friday.
At week’s end, Canadian investors will get January jobs numbers from Statistics Canada. Job growth in Canada hit a wall in December, with the economy adding a meagre 100 new jobs. The jobless rate held at 5.8 per cent. Ahead of that report, Canadians will hear from Bank of Canada Governor Tiff Macklem on Tuesday, when he speaks in Montreal on the effectiveness and limitations of monetary policy. The Bank of Canada also releases on Wednesday afternoon its deliberations from its latest policy meeting.
Overseas, the pan-European STOXX 600 was up 0.28 per cent near midday. Britain’s FTSE 100 advanced 0.42 per cent. Germany’s DAX and France’s CAC 40 gained 0.29 per cent and 0.07 per cent, respectively.
In Asia, Japan’s Nikkei rose 0.54 per cent. Hong Kong’s Hang Seng lost 0.15 per cent.
Commodities
Crude prices were choppy in early trading after last week’s sharp declines with geopolitical tensions still at the forefront.
The day range on Brent was US$76.83 to US$78.27 in the early premarket period. The range on West Texas Intermediate was US$71.69 to US$72.98. Both benchmarks fell about 7 per cent last week as markets pared bets on early rate cuts by the Federal Reserve.
Tensions in the Middle East remained heightened after the U.S. signaled further strikes on Iran-backed groups in the region in response to a deadly attack on U.S. troops in Jordan, according to Reuters.
“The barrel of US crude fell to US$72-per-barrel level last week and is not much higher this morning despite the U.S. retaliation for last weekend’s attacks,” Swissquote senior analyst Ipek Ozkardeskaya said.
“The risk of escalation with Iran remains, but that risk is not being properly priced in. Trend and momentum indicators suggest that there is room for further slide. Any price rallies could be interesting tactical shorts targeting the US$70-per-barrel level.”
In other commodities, gold prices fell amid a stronger U.S. dollar and a rise in Treasury yields.
Spot gold was down 0.5 per cent at US$2,027.80 per ounce by early Monday morning. U.S. gold futures fell 0.4 per cent to US$2,044.90 per ounce.
Currencies
The Canadian dollar was weaker in early trading while its U.S. counterpart touched a two-month high as traders trimmed bets on an early rate cut.
The day range on the loonie was 74.13 US cents to 74.32 US cents in the early premarket period. The Canadian dollar was down roughly 1.8 per cent against the greenback for the year to date.
In other currencies, the U.S. dollar index, which measures that currency against a basket of world counterparts, was up 0.33 per cent at 104.26. Last week, markets had been pricing in about even odds of a March rate cut by the Fed. That has since fallen to about 16 per cent, according to CME’s FedWatch tool.
The euro fell 0.30 per cent to US$1.0756. Britain’s pound lost 0.35 per cent to US$1.2589.
In bonds, the yield on the U.S. 10-year note was higher at 4.092 per cent ahead of the North American opening bell.
More company news
McDonald’s reported its first quarterly sales miss in nearly four years on Monday, squeezed by weak sales growth in its business division that includes the Middle East, China and India. However, the company’s overall net profit rose 7% in the fourth quarter, thanks to higher menu pricing and a let up in raw material costs. Comparable sales in the company’s International Developmental Licensed Markets segment rose 0.7% in the quarter ended Dec. 31, widely missing estimates of a 5.5% growth, according to LSEG data. The business accounted for 10% of McDonald’s overall revenue in the first nine months of 2023. -Reuters
Caterpillar reported a higher quarterly profit on Monday, buoyed by strong demand for its excavators and other large construction equipment amid higher infrastructure spending and a rebound in residential real estate market in the U.S. The company’s profit rose to US$2.68-billion, or US$5.28 per share, in the fourth quarter ended Dec. 31, from US$1.45-billion, or US$2.79 per share, a year earlier. -Reuters
Snap said on Monday it would cut around 528 employees, or 10% of its global workforce, joining other tech and media firms who recently announced job cuts. Shares of the company rose more than 2% in trading before the bell. -Reuters
Economic news
(9:30 a.m. ET) Canada’s S&P Global Services PMI for January.
(10 a.m. ET) U.S. ISM Services PMI for January.
(10:30 a.m. ET) Bank of Canada’s Market Participants Survey for Q4.
With Reuters and The Canadian Press
Terry Weber