Equities
Canada’s main stock index fell at Wednesday’s opening bell with industrial and consumer discretionary stocks under pressure as investors await the Bank of Canada’s next rate decision. On Wall Street, key indexes also started in the red amid declines in Microsoft and Boeing shares on the back of their latest earnings.
At 9:31 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was down 143.04 points, or 0.69 per cent, at 20,486.51.
In the U.S., the Nasdaq Composite dropped 187.74 points, or 1.66 per cent, to 11,146.53 at the opening bell.
The Dow Jones Industrial Average fell 195.60 points, or 0.58 per cent, at the open to 33,538.36, while the S&P 500 opened lower by 34.24 points, or 0.85 per cent, at 3,982.71.
“Basically, there are several factors that influence price moves,” AvaTrade chief market analyst Naeem Aslam said.
“Firstly, the anticipation of less aggressive monetary policy from the Fed makes traders back riskier assets. However, what takes the wind out of the rally is the U.S. corporate earnings.”
Wednesday's analyst upgrades and downgrades
Heading into Wednesday’s session, 72 of the S&P 500 companies have reported fourth-quarter results with about 65 per cent topping consensus, according to Refinitiv. On aggregate, analysts now expect S&P 500 earnings 2.9-per-cent below the year-ago quarter.
In Canada, the morning’s main event is the Bank of Canada interest rate decision. Economists are widely expecting the central bank to hike rates again by a quarter percentage point, although many also expect the move will signal a close to the BoC’s aggressive campaign of hiking borrowing costs to combat inflation.
“The Bank of Canada is expected to slow the pace of interest rate hikes today, and odds are that the 25 basis point increase that RBC Economics anticipates (down from the 50-basis-point hike in December) could be the last of this hiking cycle,” Alvin Tan, Asia FX strategist with RBC, said.
“Though broader inflation trends are still running above the Bank of Canada’s 1 per cent to 3 per cent target range, they’ve already shown clear signs of losing steam. In addition, the lagged impact of the 400 basis points of cumulative BoC rate hikes in 2022 - the most aggressive hiking cycle in decades - is still filtering through to household and business borrowing costs. “
The announcement is due at 10 a.m. ET. The central bank will also release its latest monetary policy report and hold a news conference later in the morning.
On earnings, Wall Street will get results from Tesla and IBM after the close of trading. Other companies reporting on Wednesday include Boeing and AT&T.
Shares of Microsoft were down more than 3 per cent in early trading after the software giant beat market expectations with its most recently quarterly results but disappointed with its latest forecast. Separately, Microsoft was hit with a networking outage early Wednesday that took down its cloud platform Azure along with services such as Teams and Outlook, affecting millions of users around the world.
On Bay Street, Canadian National Railway Co. reported fourth-quarter earnings growth of 23 per cent year-over-year, to $1.42-billion in the three months ended Dec. 31, 2022 — up from $1.2-billion in the fourth quarter of 2021. CN said its fourth quarter earnings worked out to $2.10 per share. It also reported fourth quarter revenues of $4.54-billion, an increase of $789-million or 21 per cent, according to The Canadian Press. However, CN also warned of economic challenges ahead and said it expects earnings-per-share growth in the single digits in 2023. The results were released after Tuesday’s close.
Overseas, the pan-European STOXX 600 was down 0.55 per cent by midday. Britain’s FTSE 100 fell 0.24 per cent. Germany’s DAX and France’s CAC 40 were off 0.45 per cent and 0.43 per cent, respectively.
In Asia, Japan’s Nikkei finished up 0.35 per cent.
Commodities
Crude prices were mostly steady, recouping early losses after new figures showed a rise in weekly U.S. inventories.
The day range on Brent was US$85.68 to US$86.81 in the early premarket period. The range on West Texas Intermediate was US$79.57 to US$80.66.
Late Tuesday, the American Petroleum Institute said U.S. crude stocks rose by 3.4 million barrels for the week ended Jan. 20.
More official U.S. government figures are due later Wednesday morning.
Elsewhere, a Reuters report suggests that OPEC and its allies are likely to endorse the group’s current policy at next week’s meeting. OPEC+ in October decided to trim output by 2 million barrels per day from November through 2023 on a weaker economic outlook.
“Reports suggest that OPEC+ delegates expect the panel to recommend no changes to output when they meet next week which indicates they believe the market is fairly balanced at the moment,” OANDA senior analyst Craig Erlam said.
“Of course, there’s considerable uncertainty in the global outlook and the China transition so that remains subject to change.”
In other commodities, gold prices pulled back from the nine-month high seen during the previous session as the U.S. dollar firmed.
Spot gold fell 0.4 per cent to US$1,930.58 per ounce by early Wednesday morning, after hitting its highest since late April on Tuesday. U.S. gold futures eased 0.2 per cent to US$1,931.40.
“It [gold] has come well off its early November lows at this point and potentially plenty of resistance [is] ahead,” Mr. Erlam said. “Of course, how much very much depends on the signals central banks and the economic data send over the coming weeks.”
Currencies
The Canadian dollar was slightly lower ahead of the Bank of Canada’s rate decision while its U.S. counterpart edged higher in subdued trading.
The day range on the loonie was 74.70 US cents to 74.94 US cents. The Bank of Canada is widely expected to raise rates by 25 basis points later Wednesday morning in what could be its last increase of the current cycle.
On world markets, the U.S. dollar index, which weighs the greenback against a group of currencies, was up 0.11 per cent to 102.02 on Wednesday. Britain’s pound fell 0.23 per cent to US$1.231.
The euro was down 0.12 per cent against the U.S. dollar at US$1.088, just off the US$1.093 level reached on Friday, which was the highest since early May, according to figures from Reuters.
In bonds, the yield on the U.S. 10-year note was lower at 3.431 per cent in the predawn period.
More company news
Boeing Co losses widened to $3.5-billion for 2022 but the U.S. plane maker reported its first yearly positive cash flow since 2018 on stronger commercial deliveries. However, Boeing shares fell more than 1 per cent in morning trading Wednesday after the company missed market expectations for revenue and earnings for the quarter. Boeing generated $3.1 billion in free cash flow in the final quarter of 2022. Boeing had forecast about $2.5 billion in free cash flow for the fourth quarter. Boeing reported $2.3 billion for all of 2022. -Reuters
Alphabet Inc’s Google said on Wednesday it believes the complaint from the U.S. Department of Justice accusing the company of abusing its dominance in digital advertising is “without merit”. The company also added it will “defend itself vigorously”. The government on Tuesday said Google should be forced to sell its ad manager suite, tackling a business that generated about 12% of Google’s revenue in 2021 while also playing a vital role in the search engine and cloud company’s overall sales. -Reuters
The Globe’s Alexandra Posadzki and Irene Galea report that the Federal Court of Appeal has dismissed the Competition Bureau’s challenge of Rogers Communications Inc.’s proposed $20-billion takeover of Shaw Communications Inc., bringing a deal that has faced repeated hurdles for close to two years a major step closer to the finish line. Final approval for the takeover, which would combine Canada’s two largest cable networks and create an opportunity for Montreal-based telecom Videotron Ltd. to expand its business westward, now rests with federal Industry Minister François-Philippe Champagne. The House of Commons industry and technology committee is set to meet Wednesday to again look at the deal.
The Globe’s Temur Durrani reports Google parent Alphabet Inc. is shutting down its artificial intelligence research office for DeepMind Technologies Ltd. in Edmonton, as the technology giant chops about 12,000 jobs worldwide in a cost-cutting measure during a sectorwide slowdown. DeepMind, a wholly owned subsidiary of Alphabet, is consolidating across Canada, the company said in a statement. It is based in Britain, where it is also laying off an unknown number of operational staff.
Britain’s competition regulator said on Wednesday it had started the first phase of an investigation into U.S. chipmaker Broadcom Inc’s $61-billion acquisition of cloud-computing firm VMware Inc. The Competition and Markets Authority (CMA) said in November it was investigating whether the deal between the two U.S.-listed companies could substantially hurt competition in Britain, adding that it had until March 22 to decide. -Reuters
Economic news
(8:30 a.m. ET) Canadian manufacturing sales for December.
(10 a.m. ET) Bank of Canada’s policy announcement and monetary policy report with Governor Tiff Macklem’s press conference to follow.
With Reuters and The Canadian Press