Be smart with your money. Get the latest investing insights delivered right to your inbox three times a week, with the Globe Investor newsletter. Sign up today.
Equities
Canada’s main stock index started higher Tuesday with advancing crude prices buoying energy stocks. South of the border, major Wall Street indexes were positive in early going helped by solid bank earnings ahead of U.S. Treasury Secretary nominee Janet Yellen’s confirmation speech.
At 9:32 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was up 47.39 points, or 0.26 per cent, at 17,992.27.
The Dow Jones Industrial Average rose 73.2 points, or 0.24 per cent, at the open to 30887.42. The S&P 500 rose 13.6 points, or 0.36 per cent, at the open to 3781.88, while the Nasdaq Composite rose 134.2 points, or 1.03 per cent, to 13132.728 at the opening bell.
“All eyes are on the confirmation hearing for Janet Yellen, who is expected to be confirmed as US Treasury Secretary,” OANDA senior analyst Jeffery Halley said.
“Ms Yellen, the Federal Reserve’s former head, will testify that the U.S. risks a more prolonged recession and long-term damage to the economy if it does not inject more government spending into the economy.”
Reports on Ms. Yellen’s prepared remarks suggest she will say now is the time to “act big” given that interest rates at at historical lows, with benefits from further spending more than offsetting the impact of a larger deficit.
“With Federal Reserve officials confirming their dovish bias last week, and incoming Treasury Secretary Yellen set to do the same today,” Mr. Halley said.
On the corporate side, earnings season kicks into gear with results this morning from Goldman Sachs and Bank of America. On Friday, JPMorgan Chase, Wells Fargo and Citigroup all reported results to tepid investor response.
After the close, Netflix Inc. reports its latest results.
Bank of America reported net income applicable to common shareholders fell to US$5.21-billion, or 59 US cents per share, for the quarter ended Dec. 31 from US$6.75-billion, or 74 US cents per share, a year earlier. Analysts on average had expected a profit of 55 US cents per share, according to the IBES estimate from Refinitiv.
Goldman Sachs said net earnings applicable to common shareholders rose to US$4.36-billion in the quarter ended Dec. 31 from US$1.72-billion a year ago. Earnings per share rose to US$12.08 from US$4.69 a year earlier. Analysts had expected a profit of US$7.47 per share on average, according to the IBES estimate from Refinitiv.
In this country, Norbord shareholders will vote on the sale of the company to West Fraser Timber. Norbord CEO Peter Wijnbergen said in November that the $4-billion all-stock deal will create a “one-stop shop” for construction customers and offer greater access to capital for corporate growth.
Overseas, the pan-European STOXX 600 rose 0.19 per cent. Britain’s FTSE 100 gained 0.29 per cent. Germany’s DAX and France’s CAC 40 rose 0.31 per cent and 0.08 per cent, respectively.
In Asia, Japan’s Nikkei finished up 1.39 per cent. Hong Kong’s Hang Seng jumped 2.7 per cent.
Commodities
Crude prices gained as traders bet that government stimulus would offset the impact of rising coronavirus infections and related lockdowns on demand.
The day range on Brent is US$54.89 to US$55.45. The range on West Texas Intermediate is US$51.76 to US$52.65.
“We are entering a particularly sensitive period for oil,” Axi chief market strategist Stephen Inne said in a note.
“Chinese New Year is less than a month away, and with COVID infection numbers already on the rise again in parts of Asia, there are always concerns about what the festive LNY season may mean for endeavours to contain the spread of the virus.”
Markets drew continued support from U.S. President-elect Joe Biden’s US$1.9-trillion stimulus plan as well as the expectation that Treasury Secretary nominee Janet Yellen would use her confirmation speech Tuesday to encourage further stimulus efforts to bolster the economy.
Tempering gains, however, was the latest forecast from the International Energy Agency, which cautioned that demand recovery will take a hit from the latest spike in COVID-19 cases. The agency also said vaccine rollouts and stimulus measures will help demand in the second half of the year.
“Perhaps unsurprisingly given OPEC’s comments last week, the IEA has cut its forecast for oil demand in 2021.” Mr. Innes said.
“The cut is a result of subdued demand due to a resurgence of COVID and increased lockdowns.”
Later Tuesday, traders will get the first of two weekly U.S. inventory reports, when the American Petroleum Institute releases its weekly tally. A more official report will be released Wednesday by the U.S. Energy Information Administration on Wednesday morning.
In other commodities, gold prices edged higher after hitting its lowest level in more than a month during the previous session.
Spot gold rose 0.1 per cent to US$1,837.91 per ounce, recovering from its lowest since Dec. 2 at US$1,809.90 hit on Monday. U.S. gold futures gained 0.5 per cent to US$1,839.80.
“The key factor appears to be the (U.S.) currency,” Michael McCarthy, chief market strategist at CMC Markets said.
Currencies
The Canadian dollar was firmer as its U.S. counterpart slid against world currencies ahead of remarks from U.S. Treasury Secretary nominee Janet Yellen.
The day range on the loonie is 78.37 US cents to 78.62 US cents.
“The CAD is lagging its G10 commodity peers on the session and we expect the exchange rate to consolidate somewhat in early 2021 (reflecting typical seasonal gains for the USD to an extent),” Shaun Osborne, chief FX strategist with Scotiabank, said.
“But the constructive outlook for commodity prices (we note multiple bullish calls for copper emerging over the past few days) suggests that downside scope for the CAD is relatively limited and that the CAD should benefit from the bullish commodity cycle in the medium term.”
On world markets, the U.S. dollar index, which measures the currency against a basket of rivals, fell 0.2 per cent to 90.587, but it was still above the more than 2-1/2 year low of 89.206 touched at the start of this month, according to figures from Reuters.
“We’ve seen comments from Janet Yellen that she won’t be pursuing a weak [U.S.] dollar policy per se, but that doesn’t mean that the overall impact of Fed policy won’t keep the dollar weakening,” said Michael McCarthy, chief strategist at CMC Markets in Sydney.
“I suspect what we’ve been seeing in the dollar at the moment is a minor corrective rally in an overall downtrend.”
With the U.S. dollar weakening, the euro gained, rising 0.3 per cent to US$1.2109.
More company news
The Globe’s Jeffrey Jones reports Montreal’s Desmarais family and a group of financial institutions have launched a $1-billion investment fund to buy into solar and wind energy projects in the latest show of Canadian financial might for the renewable sector. The sustainable energy unit of Power Corp., the family holding company, has partnered with Desjardins Group, Great-West Lifeco, National Bank of Canada and Switzerland’s Après-demain SA to seek out investments in Canada and the United States. The new fund, called Power Sustainable Energy Infrastructure Partnership, aims to invest the money over the next 24 to 36 months.
Cisco Systems Inc’s purchase of Acacia Communications Inc has been approved by China’s antitrust regulator on condition that the companies ensure fair competition, the watchdog said on Tuesday. The State Administration for Market Regulation’s (SAMR) green light brings the $4.5 billion dollar deal to a close after approval from other countries including the United States.
Halliburton Co on Tuesday reported a 60% rise in fourth-quarter adjusted profit from the third, as demand for oilfield equipment and services recovered slightly from the pandemic-driven fall-out in drilling activity and on the back of cost cuts. Adjusted net income attributable to company rose to $160-million, or 18 cents per share, in the three months ended Dec. 31, from the $100-million, or 11 cents per share, in the third quarter.
Boeing’s 737 Max airliner will receive final clearance to resume flying in Europe next week, the head of the EU’s air safety watchdog said on Tuesday. The EU Aviation Safety Agency (EASA) published a draft airworthiness directive in November and has made some largely presentational changes after public consultations, Executive Director Patrick Ky said in an online media briefing.
ODP Corp said on Tuesday it rejected Staples’ more than US$2-billion takeover offer and instead proposed merging only the consumer-focused retail operations of the two office supplies companies to avoid regulatory scrutiny, Reuters reports. Staples’ earlier attempts at combining the companies, in 1996 and 2016, were foiled as antitrust enforcers deemed the deal would mean higher stationery prices and reduced competition for nationwide contracts for office supplies. ODP, owner of Office Depot, OfficeMax and office IT service provider CompuCom, said it preferred a sale of its retail and e-commerce operations to Staples, or a joint venture, to a full takeover. Staples, a public company when the first offers were made, was taken private by Sycamore Partners in 2017.
Economic news
(8:30 a.m. ET) Canadian manufacturing sales for November.
(8:30 a.m. ET) Canadian wholesale trade for November.
With Reuters and The Canadian Press