Equities
Canada’s main stock index started lower Tuesday as weaker global sentiment offset a tamer-than-forecast reading on inflation. On Wall Street, key indexes were also down in early trading after retailers Home Depot and Walmart offered disappointing forecasts.
At 9:34 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was down 76.65 points, or 0.37 per cent, at 20,438.59.
In the U.S., the Dow Jones Industrial Average fell 127.00 points, or 0.38 per cent, at the open to 33,699.69. The S&P 500 opened lower by 26.74 points, or 0.66 per cent, at 4,052.35, while the Nasdaq Composite dropped 146.90 points, or 1.25 per cent, to 11,640.37 at the opening bell.
Traders are looking ahead to the release on Wednesday afternoon of the minutes from the Fed’s most recent meeting, looking for clues about the path forward on interest rates.
“While most anticipate that the Fed will continue in 25-basis-point increments and that the bar for returning to a 50-basis-point pace is high, it is not insurmountable,” Stephen Innes, managing partner with SPI Asset Management, said.
“Indeed, if U.S. economic data continues to run hot, it would likely make for a more compelling case for returning briefly to a larger incremental rate hike regime.
In this country, economics will also be key.
Statistics Canada said the annual rate of inflation eased to 5.9 per cent in January, from 6.3 per cent in December. Economists had been forecasting a number closer to 6.1 per cent in January. Excluding food and energy, consumer prices rose 4.9 per cent year-over-year compared with 5.3 per cent in December.
On a monthly basis, the consumer price index was up 0.5 per cent. Economists had been forecasting a 0.7-per-cent increase.
“Today’s data added to evidence that inflation is coming under control, even as growth in the economy continues to hold up better than expected in the face of higher interest rates, creating a confusing picture for the Bank of Canada,” CIBC senior economist Andrew Grantham said in a note.
Meanwhile, the agency also said retail sales in December rose 0.5 per cent to $62.1-billion. Sales were up in seven of 11 subsectors. The increase matched market forecasts.
On the corporate side, Teck Resources said early Tuesday it has changed its name to Teck Metals Corp and would also spin off its steelmaking coal unit as Elk Valley Resources Ltd.
The unit, which has four mines in Elk Valley, British Columbia, has been plagued by several snags in the past three years, including supply-chain disruptions, adverse weather events, labor shortages and an outage at Elkview plant, Reuters reports.
On Wall Street, Home Depot shares fell about 5 per cent in morning trading after the home improvement retailer forecast annual profit below Wall Street expectations. The company also missed fourth-quarter comparable sales estimates. The company said it expects earnings per share to decline in the mid-single digits percentage range for 2023, while analysts were expecting a 0.4-per-cent increase to $16.72, according to Refinitiv data.
Meanwhile, Walmart also forecast lower-than-expected earnings for the fiscal year, citing economic uncertainty. Walmart forecast fiscal 2024 earnings of $5.90 to $6.05 per share, compared with analysts’ estimates of $6.50 per share, according to Refinitiv IBES data. In the most recent quarter, ended Jan. 31, Walmart beat profit and revenue forecasts. Shares were down about 1 per cent shortly after the opening bell in New York.
Overseas, the pan-European STOXX 600 was down 0.19 per cent in morning trading. Britain’s FTSE 100 fell 0.28 per cent. Germany’s DAX and France’s CAC 40 lost 0.44 per cent and 0.45 per cent, respectively.
In Asia, Japan’s Nikkei ended down 0.21 per cent. Hong Kong’s Hang Seng lost 1.71 per cent with tech stocks under pressure.
Commodities
Crude prices were choppy in early trading with demand concerns on the back of economic worries continuing to weigh on sentiment.
The day range on Brent was US$82.65 to US$83.94 in the early premarket period. The range on West Texas Intermediate was US$75.97 to US$77.51.
“Oil remains choppy this week,” OANDA senior analyst Craig Erlam said.
“There is undoubtedly more optimism around the Chinese economy which will stimulate more demand this year but at the same time, sentiment is cooling on the global economy as interest rates are projected to go a little higher than previously anticipated,” he said.
Tighter supply, meanwhile, lent some support.
Russia plans to cut oil production by 500,000 barrels per day, or about 5 per cent of its output, in response to price caps imposed by the West.
Russia is part of the OPEC+ producer group which agreed in October to cut oil production targets by 2 million bpd until the end of 2023, Reuters reports.
In other commodities, were down, hit by a stronger U.S. dollar.
Spot gold fell 0.3 per cent to US$1,835.70 per ounce early Tuesday morning. U.S. gold futures eased 0.4 per cent to US$1,843.10.
“While bulls may be encouraged by Friday’s rebound, others may take a little more convincing,” Mr. Erlam said.
“That it came around notable support, in the US$1,820 region, and on weaker momentum could be the biggest sign that the corrective move is seeing pushback.”
More company news
Canada’s Suncor Energy Inc said on Tuesday that former Exxon Mobil executive Rich Kruger would take over as its chief executive officer, replacing interim boss Kris Smith. Kruger, a near 40-year veteran of Exxon Mobil Corp, served as CEO of Imperial Oil Ltd for six years before retiring in 2019. His appointment is effective April 3. -Reuters
Currencies
The Canadian dollar was down modestly while its U.S. counterpart traded near its best level in six weeks against a group of currencies.
The day range on the loonie was 74.11 US cents to 74.39 US cents in the early premarket period. The loonie is down about 0.92 per cent over the last five days but remains up 0.68 per cent for the year so far.
Canadian inflation and retail sales figures are due this morning.
On world markets, the U.S. dollar index, which weighs the greenback against a basket of currencies sat around 104, just short of Friday’s six-week high of 104.67, according to figures from Reuters. The index is up about 2 per cent so far this month.
The euro was last down 0.2 per cent on the day against the U.S. dollar at $1.0667 and is down nearly 2 per cent so far this month.
Britain’s pound rose 0.3 per cent against the U.S. dollar to US$1.2071 after a reading on U.K. business activity in early February came in stronger than expected.
In bonds, the yield on the U.S. 10-year note was up at 3.877 per cent ahead of the North American opening bell.
Economic news
Euro zone PMI
(8:30 a.m. ET) Canadian CPI for January.
(8:30 a.m. ET) Canadian retail sales for December.
(10 a.m. ET) U.S. existing home sales for January.
With Reuters and The Canadian Press