Wall Street futures steadied Tuesday with a earnings remaining in focus ahead of tomorrow’s Federal Reserve rate decision. Major European markets were down. TSX futures were also little changed as traders weigh the latest reading on Canada’s broad economic health.
In the early premarket period, futures linked to the key U.S. indexes had been in the red but found their footing as the North American open approached. All three saw weaker finishes on Monday but are on track for solid gains heading for the month. The S&P 500 is up more than 4 per cent for the month so far while the Nasdaq has gained more than 8 per cent. The S&P/TSX Composite Index ended down 0.7 per cent on Monday.
“The January rally has hit a wall and probably won’t have a chance of returning until we get beyond Wednesday’s Fed press conference and Apple’s results after the Thursday close,” OANDA senior analyst Ed Moya said.
On Tuesday, U.S. markets get quarterly earnings from McDonald’s, General Motors, Caterpillar and Pfizer. Snap reports after the close.
GM shares jumped in premarket trading after the auto maker posted adjusted earnings per share of US2.12 in the fourth quarter, topping analysts’ forecasts of US$1.69. Quarterly revenue came in at US$43.11-billion, also beating market expectations.
In Canada, Imperial Oil reported this morning while Canadian Pacific Railway posts results after the close of trading.
Calgary-based Imperial Oil reported higher fourth-quarter profit helped by higher prices and tighter supply. Imperial reported net income of $1.7-billion, or $2.86 per share, for the three months ended Dec. 31, up from $813-million or $1.18 per share, a year earlier.
On the economic side, Canadian investors got a reading on November gross domestic product from Statistics Canada before the start of trading. Statscan says the economy grew by 0.1 per cent in the quarter, in line with market forecasts. A preliminary estimate from the agency also suggests real gross domestic product grew by an annualized rate of 1.6 per cent in the fourth quarter, above the Bank of Canada’s forecast of 1.3 per cent.
“This report isn’t likely to cause the BoC to have any second thoughts regarding its recent pause,” TD senior economist James Orlando said. “The economy hasn’t yet absorbed the impact of past rate hikes. Though we are seeing the beginning of this, there is more to come, with GDP and employment growth set to stall in the coming months.”
Overseas, the pan-European STOXX 600 was down 0.68 per cent by midday. Britain’s FTSE 100 slid 0.73 per cent. Germany’s DAX and France’s CAC 40 were off 0.46 per cent and 0.37 per cent, respectively. New figures released Tuesday showed GDP in the euro zone expanded by 0.1 per cent in the fourth quarter. Markets had been expecting a contraction of 0.1 per cent.
In Asia, Japan’s Nikkei closed down 0.39 per cent. Hong Kong’s Hang Seng lost 1.03 per cent.
Commodities
Crude prices were weaker as markets remain cautious ahead of Wednesday’s Fed rate decision and traders weigh oil outflows from Russia.
The day range on Brent was US$85.73 to US$85.25 in the early premarket period. The range on West Texas Intermediate was US$76.63 to US$78.14.
“Oil prices remain soggy despite Asia’s unquenching thirst for all things oil,” Stephen Innes, managing partner with SPI Asset Management, said in a note.
“The problem for the oil bull is that thirst is getting satiated by discount Russian barrels.”
Reuters reports that Russia’s oil loadings from its Ust-Luga port are expected to rise at the beginning of February, despite western sanctions imposed over its invasion of Ukraine.
As well, traders remain wary of the midweek policy announcement from the Federal Reserve and a rate decision Thursday by the European Central Bank. Concerns remain that rising rates will temper economic growth and weigh on global demand.
However, the International Monetary Fund (IMF) has raised its 2023 global growth outlook slightly due to “surprisingly resilient” demand in the United States and Europe, an easing of energy costs and the reopening of China’s economy after Beijing abandoned its strict COVID-19 restrictions, according to Reuters.
Gold prices hit a one-week low as the U.S. dollar firmed ahead of tomorrow’s Fed decision.
Spot gold was down 0.8 per cent at US$1,906.51 per ounce by early Tuesday morning, its lowest level since Jan. 19. Still, gold is up more than 4 per cent on the month and remains headed for its third consecutive monthly increase.
U.S. gold futures were down 0.9 per cent at $1,922.00.
“Gold’s main kryptonite is if the Fed can’t control inflation and they need to tighten much more than markets are expecting,” OANDA’s Ed Moya said.
“Gold could enter the ‘danger zone’ if we get a couple more hotter-than-expected inflation reports and a robust [U.S. non-farm payrolls] report that suggests wage pressures will be here for a while.”
Currencies
The Canadian dollar was down while its U.S. counterpart advanced against a group of currencies but still looked set for its fourth monthly decline in a row.
The day range on the loonie was 74.30 US cents to 74.76 US cents in the early hours.
“The CAD gains are hard to come by but are easily conceded still, it seems, even if movement is driven mainly by external factors,” Shaun Osborne, chief FX strategist with Scotiabank, said, noting risk aversion and a strong U.S. dollar are both weighing on the loonie this morning.
On world markets, the U.S. dollar index, which weighs the currency against a group of peers, was up 0.31 per cent at 102.56 early Tuesday morning.
However, the index was down nearly 1 per cent for the month. A January decline would mark the fourth straight down month.
Elsewhere, the euro slid in early trading in Europe and was last down 0.41 per cent at US$1.081, according to figures from Reuters.
Britain’s pound was down 0.29 per cent at US$1.231, but was on track for its fourth monthly increase. The yen gained 0.1% at 130.34 per U.S. dollar and was set for its third monthly gain.
In bonds, the yield on the U.S. 10-year note was lower at 3.531 per cent in the predawn period.
More company news
Caterpillar Inc on Tuesday reported a lower-than-expected quarterly profit as increasing manufacturing costs related to materials and freight pressured the heavy machinery maker’s margins. Adjusted profit for the quarter ended December rose to $3.86 share from $2.69 a year earlier. Analysts on average had expected a profit of $4.02 per share, according to Refinitiv IBES data. –Reuters
Exxon Mobil Corpposted $59-billion in adjusted profit for 2022, the company said on Tuesday, taking home more than $6.7-million per hour last year, and setting not only a company record but a historic high for the Western oil industry. Oil majors are expected to break their own annual records on high prices and soaring demand, pushing their combined take to near $200-billion. The scale has renewed criticism of the oil industry and sparked calls for more countries to levy windfall profit taxes on the companies. Exxon’s results far exceeded the then-record $45.2 billion net profit it reported in 2008, when oil hit $142 per barrel, 30% above last year’s average price. Deep cost cuts during the pandemic helped supercharge last year’s earnings. -Reuters
Volkswagen is looking at setting up a battery cell factory in Ontario, the Handelsblatt business daily reported on Tuesday, adding that the province had offered investments and other incentives. Five entries from this month are listed in a lobby register of the province for Volkswagen, including one that mentions Chief Executive Oliver Blume by name, the report said, citing the documents. –Reuters
General Motors Co and Lithium Americas Corp on Tuesday announced they would jointly invest to develop the Thacker Pass mine in Nevada. Under the agreement, GM will make an equity investment of $650-million in Lithium Americas. -Reuters
Pfizer Inc. forecast 2023 sales of its COVID-19 products of $21.5-billion that fell short of Wall Street expectations, hit by lower demand in international markets and slower uptake of booster vaccines. The U.S. drugmaker said it expects sales of $13.5-billion from the vaccine for 2023, below Refinitiv estimates of $14.39-billion, and projected $8-billion in sales of its antiviral pill, Paxlovid, short of $10.33-billion the Street expects. –Reuters
McDonald’s Corpbeat Wall Street estimates for quarterly comparable sales on Tuesday, boosted by higher menu prices, increased restaurant traffic and gains in most major markets. The burger chain’s global same-store sales increased 12.6% in the fourth quarter ended Dec. 31, compared with estimates for an 8.6% rise, according to IBES data from Refinitiv. Sales in the UK, Germany and France rose despite fears of a recession in Europe. -Reuters
Economic news
(8:30 a.m. ET) Canada’s monthly real GDP for November.
(8:30 a.m. ET) U.S. employment cost index for Q4.
(9 a.m. ET) S&P CoreLogic Case-Shiller Home Price Index (20 city) for November.
(9 a.m. ET) U.S. FHFA House Price Index.
(9:45 a.m. ET) U.S. Chicago PMI for January.
(10 a.m. ET) U.S. Conference Board Consumer Confidence for January.
MONTREAL – Travel company Transat AT Inc. reported a loss in its latest quarter compared with a profit a year earlier as its revenue edged lower.
The parent company of Air Transat says it lost $39.9 million or $1.03 per diluted share in its quarter ended July 31.
The result compared with a profit of $57.3 million or $1.49 per diluted share a year earlier.
Revenue in what was the company’s third quarter totalled $736.2 million, down from $746.3 million in the same quarter last year.
On an adjusted basis, Transat says it lost $1.10 per share in its latest quarter compared with an adjusted profit of $1.10 per share a year earlier.
Transat chief executive Annick Guérard says demand for leisure travel remains healthy, as evidenced by higher traffic, but consumers are increasingly price conscious given the current economic uncertainty.
This report by The Canadian Press was first published Sept. 12, 2024.
Dollarama Inc.’s food aisles may have expanded far beyond sweet treats or piles of gum by the checkout counter in recent years, but its chief executive maintains his company is “not in the grocery business,” even if it’s keeping an eye on the sector.
“It’s just one small part of our store,” Neil Rossy told analysts on a Wednesday call, where he was questioned about the company’s food merchandise and rivals playing in the same space.
“We will keep an eye on all retailers — like all retailers keep an eye on us — to make sure that we’re competitive and we understand what’s out there.”
Over the last decade and as consumers have more recently sought deals, Dollarama’s food merchandise has expanded to include bread and pantry staples like cereal, rice and pasta sold at prices on par or below supermarkets.
However, the competition in the discount segment of the market Dollarama operates in intensified recently when the country’s biggest grocery chain began piloting a new ultra-discount store.
The No Name stores being tested by Loblaw Cos. Ltd. in Windsor, St. Catharines and Brockville, Ont., are billed as 20 per cent cheaper than discount retail competitors including No Frills. The grocery giant is able to offer such cost savings by relying on a smaller store footprint, fewer chilled products and a hearty range of No Name merchandise.
Though Rossy brushed off notions that his company is a supermarket challenger, grocers aren’t off his radar.
“All retailers in Canada are realistic about the fact that everyone is everyone’s competition on any given item or category,” he said.
Rossy declined to reveal how much of the chain’s sales would overlap with Loblaw or the food category, arguing the vast variety of items Dollarama sells is its strength rather than its grocery products alone.
“What makes Dollarama Dollarama is a very wide assortment of different departments that somewhat represent the old five-and-dime local convenience store,” he said.
The breadth of Dollarama’s offerings helped carry the company to a second-quarter profit of $285.9 million, up from $245.8 million in the same quarter last year as its sales rose 7.4 per cent.
The retailer said Wednesday the profit amounted to $1.02 per diluted share for the 13-week period ended July 28, up from 86 cents per diluted share a year earlier.
The period the quarter covers includes the start of summer, when Rossy said the weather was “terrible.”
“The weather got slightly better towards the end of the summer and our sales certainly increased, but not enough to make up for the season’s horrible start,” he said.
Sales totalled $1.56 billion for the quarter, up from $1.46 billion in the same quarter last year.
Comparable store sales, a key metric for retailers, increased 4.7 per cent, while the average transaction was down2.2 per cent and traffic was up seven per cent, RBC analyst Irene Nattel pointed out.
She told investors in a note that the numbers reflect “solid demand as cautious consumers focus on core consumables and everyday essentials.”
Analysts have attributed such behaviour to interest rates that have been slow to drop and high prices of key consumer goods, which are weighing on household budgets.
To cope, many Canadians have spent more time seeking deals, trading down to more affordable brands and forgoing small luxuries they would treat themselves to in better economic times.
“When people feel squeezed, they tend to shy away from discretionary, focus on the basics,” Rossy said. “When people are feeling good about their wallet, they tend to be more lax about the basics and more willing to spend on discretionary.”
The current economic situation has drawn in not just the average Canadian looking to save a buck or two, but also wealthier consumers.
“When the entire economy is feeling slightly squeezed, we get more consumers who might not have to or want to shop at a Dollarama generally or who enjoy shopping at a Dollarama but have the luxury of not having to worry about the price in some other store that they happen to be standing in that has those goods,” Rossy said.
“Well, when times are tougher, they’ll consider the extra five minutes to go to the store next door.”
This report by The Canadian Press was first published Sept. 11, 2024.
TORONTO – The U.S. Consumer Financial Protection Bureau has ordered TD Bank Group to pay US$28 million for repeatedly sharing inaccurate, negative information about its customers to consumer reporting companies.
The agency says TD has to pay US$7.76 million in total to tens of thousands of victims of its illegal actions, along with a US$20 million civil penalty.
It says TD shared information that contained systemic errors about credit card and bank deposit accounts to consumer reporting companies, which can include credit reports as well as screening reports for tenants and employees and other background checks.
CFPB director Rohit Chopra says in a statement that TD threatened the consumer reports of customers with fraudulent information then “barely lifted a finger to fix it,” and that regulators will need to “focus major attention” on TD Bank to change its course.
TD says in a statement it self-identified these issues and proactively worked to improve its practices, and that it is committed to delivering on its responsibilities to its customers.
The bank also faces scrutiny in the U.S. over its anti-money laundering program where it expects to pay more than US$3 billion in monetary penalties to resolve.
This report by The Canadian Press was first published Sept. 11, 2024.
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