Equities
Canada’s main stock index opened down Wednesday on weakness in energy and materials shares. On Wall Street, key indexes also started in the red as traders weigh results from big corporate names and await the Federal Reserve’s rate decision later in the day.
At 9:31 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was down 50.73 points, or 0.25 per cent, at 20,500.8.
In the U.S., the Dow Jones Industrial Average fell 92.08 points, or 0.26 per cent, at the open to 35,345.99.
The S&P 500 opened lower by 8.50 points, or 0.19 per cent, at 4,558.96, while the Nasdaq Composite dropped 21.03 points, or 0.15 per cent, to 14,123.52 at the opening bell.
Wednesday afternoon, markets will get the Fed’s latest policy decision. Markets have priced in a quarter percentage point rate increase although economists are divided on where the central bank goes from here.
“When it comes to the Fed meeting today, what matters most is the commentary from the Fed, not so much the actual decision,” Naeem Aslam, chief investment officer for Zaye Capital Markets, said.
“But that is only if the Fed increases the interest rate by 25 basis points. Anything more than that or keeping the interest rate unchanged will change the game all together, and those events are bound to bring massive volatility.”
The decision is due at 2 p.m. ET and will be followed by a news conference by Fed chair Jerome Powell.
In Canada, markets will get the minutes from the Bank of Canada’s July meeting, when that central bank again raised interest rates after delivering a quarter point increase in June. The minutes are due at 1:30 p.m. ET.
“While the accompanying statement [for the July increase] and monetary policy report was hawkish given the upgrades to the GDP and inflation forecasts, it was offset by Governor [Tiff] Macklem’s press conference reference to ‘trying to balance the risks of over- and under-tightening’ within a data dependent framework,” Alvin Tan, Asia FX strategist with RBC, said.
“The press conference also indicated that the possibility of keeping rates unchanged was discussed, so the summary may flesh out the policy debate in greater detail.”
On the earnings front, Canadian investors got results this morning from Rogers Communications and Loblaw.
Ahead of the opening bell, Loblaw said revenue rose 6.9 per cent to $13.74-billion in the quarter ended June 17, compared with analysts’ average estimate of $13.63-billion, according to Refinitiv data. Loblaw stock was down roughly 2 per cent on the TSX shortly after the start of trading.
Rogers, meanwhile, raised its profit and cash-flow forecasts. The telecom giant said it now expects growth in adjusted core earnings to be between 33 per cent and 36 per cent in 2023, compared with its prior forecast of 31 per cent to 35 per cent. Rogers raised its 2023 free cash flow outlook to between $2.2-billion and $2.5-billion, compared with the company’s previous forecast of $2-billion to $2.2-billion. Shares were up in early trading in Toronto.
On Wall Street, Coca-Cola, Stellantis and Boeing report this morning. Facebook-parent Meta reports after the close of trading.
Meanwhile, shares of Google-parent Alphabet were up more than 6 per cent in morning trading after the company topped profit expectations with its latest results. Microsoft shares, however, fell about 3 per cent after that company also beat analysts’ forecast in the latest quarter but saw costs rise and saw cloud revenue growth slow.
Overseas, the pan-European STOXX 600 was down 1.16 per cent by midday. Britain’s FTSE 100 lost 0.74 per cent. Germany’s DAX and France’s CAC 40 fell 1.20 per cent and 2.17 per cent, respectively.
In Asia, Japan’s Nikkei finished down 0.04 per cent. Hong Kong’s Hang Seng lost 0.36 per cent.
Commodities
Oil prices slid in early trading after weekly U.S. industry data showed a rise in crude stockpiles against a backdrop of another expected U.S. interest-rate increase.
The day range on Brent was US$83.09 to US$83.64 in the early premarket period. The range on West Texas Intermediate was US$79.06 to US$79.58.
“With lower inflation and recession risk ebbing (soft landing) now getting baked in as part of the higher oil discussion, and besides ‘tight supply,’ it is harder to see what can provide a further upside surprise to the bullish narrative, especially with the U.S., Euro areas nor China expected to be powerful locomotives for demand growth next year,” Stephen Innes, managing partner with SPI Asset Management, said.
Sentiment took a hit after the American Petroleum Institute reported that weekly crude inventories rose by 1.32 million barrels for the week ended July 21.
Analysts polled by Reuters had expected a 2.3 million barrel decline.
More official U.S. government figures are due later this morning.
In other commodities, gold edged higher ahead of this afternoon’s Fed decision. Spot gold was up 0.3 per cent to US$1,969.51 per ounce by early Wednesday morning, while U.S. gold futures gained 0.4 per cent to US$1,971.00.
Currencies
The Canadian dollar was down early Wednesday morning amid tepid global risk sentiment while its U.S. counterpart held near a two-week high against a group of world currencies.
The day range on the loonie was 75.71 US cents to 75.95 US cents in the early premarket period.
The U.S. dollar index, which measures the currency against six major peers, slid 0.17 per cent to 101.14, but was close to a two week high touched on Tuesday, according to figures from Reuters.
The euro rose 0.1 per cent to US$1.1070, after hitting a two-week low on Tuesday. The European Central Bank makes its next policy decision on Thursday and is expected to raise interest rates.
Britain’s pound was little changed at US$1.2908. The Bank of England makes its next rate decision on Aug. 3.
In bonds, the yield on the U.S. 10-year note was lower at 3.881 per cent ahead of the North American open.
More company news
The Globe’s Eric Atkins reports that Canadian National Railway Co.’s profit fell by 12 per cent in the second quarter amid economic weakness that reduced demand for oil, grain exports and consumer products. The wildfires in parts of Canada also affected shipments of goods, said Montreal-based CN, which reported a 7-per-cent drop in revenue to $4.1-billion after markets closed on Tuesday. Profit for the three months ending on June 30 was $1.16-billion, or $1.76 a share, compared with $1.33-billion ($1.92) in the same quarter of 2022. Revenue tonne miles – the metric for revenue earned by transporting one tonne of freight per mile – fell by 8 per cent from a year ago, dragged down by an 11-per-cent drop in shipping containers, CN’s second-biggest segment.
Revenue and operating profit grew at Stellantis in the first half to beat estimates, with CEO Carlos Tavares saying the automaker would have to accelerate cost cutting to keep profitability strong in a more challenging pricing environment. The world’s third largest automaker by sales said on Wednesday its January-June adjusted earnings before interest and tax (EBIT) rose 11% to 14.1 billion euros (US$15.6-billion), topping the 12.1 billion expected by analysts in a Reuters poll. -Reuters
Coca-Cola Co raised its annual revenue forecast on Wednesday, betting on higher pricing and resilient demand for its sodas, especially its namesake drink and Sprite. The company now expects organic revenue growth of 8 per cent to 9 per cent for the full year, compared with a prior forecast of an increase of 7 per cent to 8 per cent. -Reuters
Boeing said it was ramping up production of its bestselling 737 MAX narrowbody jet to 38 per month from 31, a sign the planemaker was recovering from a supplier error that had scuttled its plans for an early ramp up. Its defense business, however, continued to face challenges, with three major fixed-price programs - NASA’s Starliner capsule, the U.S. Air Force’s T-7 training jet and U.S. Navy’s MQ-25 tanker drone - recording about half a billion in charges in the second quarter. Boeing reiterated its plan to generate US$3-billion to US$5-billion in free cash flow this year, as well as to deliver at least 400 single-aisle 737s and 70 787 Dreamliners in 2023. -Reuters
Economic news
(10 a.m. ET) U.S. new home sales for June.
(1:30 p.m. ET) Release of the Bank of Canada’s Summary of Deliberations for the July 12 decision
(2 p.m. ET) U.S. Fed announcement with chair Jerome Powell’s press conference to follow.
With Reuters and The Canadian Press