Canada’s main stock index was treading water early Wednesday with energy shares under pressure as crude prices continued to fall. On Wall Street, key indexes saw modest gains at the opening bell ahead of 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 3.38 points, or 0.02%, at 20,404.18.
In the U.S., the Dow Jones Industrial Average rose 42.11 points, or 0.13%, at the open to 33,726.64. The S&P 500 opened higher by 2.67 points, or 0.06%, at 4,122.25, while the Nasdaq Composite gained 16.53 points, or 0.14%, to 12,097.04 at the opening bell.
On Wednesday, the Fed’s rate decision will be key. Markets are expecting a quarter point rate increase but focus will also be on whether the central bank signals a pause in its lengthy tightening campaign.
“So assuming the 25 basis points is delivered, focus will be on any statement changes and Fed Chair [Jerome] Powell’s press conference for guidance on the June meeting – does the Fed keep the door open to another rate hike or will it pause and effectively reach the end of the hiking cycle?” Elsa Lignos, global head of FX strategy with RBC, said.
“Our U.S. rates strategists expect a June pause, with the caveat ‘that will easily switch to a hike if the upcoming data points aren’t consistent with a sustained turn in inflation or softening in labour market’.”
In the Fed’s statement, she said, the key factor to watch is whether the line ‘some additional policy firming may be appropriate’ is altered or removed altogether. No change, she said, would be read as hawkish.
“In the press conference, we think that Powell will do his best to leave the door open to further hikes at this meeting given the amount of data between now and the June one,” she said.
On the corporate side, Canadian investors got results from grocery giant Loblaw Co. Ltd. ahead of the start of trading. Barrick Gold is also among the Canadian companies reporting results.
Loblaw said first-quarter sales rose 6 per cent in the most recent quarter, helped by demand for essential goods. The company’s first-quarter revenue rose to $13-billion from $12.26-billion a year earlier. Shares were down about 3 per cent shortly after the start of trading in Toronto.
On Wall Street, CVS Health and Yum Brands report.
Overseas, the pan-European STOXX 600 was up 0.31 per cent by afternoon. Britain’s FTSE 100 advanced 0.28 per cent. Germany’s DAX and France’s CAC 40 gained 0.64 per cent and 0.35 per cent, respectively.
In Asia, Hong Kong’s Hang Seng fell 1.18 per cent. Markets in Japan were closed.
Commodities
Crude prices continued to tumble with economic concerns weighing on sentiment ahead of another expected rate hike by the Federal Reserve.
The day range on Brent is US$73.50 to US$75.58 in the premarket period. The range on West Texas Intermediate was US$69.79 to US$71.79.
Both benchmarks fell about 5 per cent on Tuesday. By early Wednesday morning, both were down by more than 2 per cent.
“Oil is in the danger zone as the banking crisis is crippling the short-term outlook for the economy and driving fears that we could be recession bound a lot faster,” OANDA senior analyst Ed Moya said.
“Oil basically has weakening prospects from the world’s two largest economies, China and the U.S., and if the macro backdrop deteriorates, momentum selling could easily send prices below the US$70 level.”
Meanwhile, U.S. crude inventories fell for a third consecutive week, down 3.9 million barrels last week, according to figures from the American Petroleum Institute. More official U.S. government figures are due later Wednesday morning.
In other commodities, gold was trading above US$2,000 an ounce as economic concerns enhanced the metal’s safe-haven appeal.
Spot gold was flat at $2,016.28 per ounce by early Wednesday morning after rising more than 1 per cent on Tuesday.
U.S. gold futures rose 0.1 per cent. to $2,025.10.
“Gold will remain a volatile trade, especially if it [the Fed] refuses to take the bait and keep all options on the table for the June meeting,” Mr. Moya said.
Currencies
The Canadian dollar was steady in early trading while its U.S. counterpart pulled back against a basket of world currencies ahead of this afternoon’s Fed decision.
The day range on the loonie was 73.35 US cents to 73.52 US cents in the predawn period.
“The CAD continues to trade in the shadow of the USD to a large extent but could pick up some support if the FOMC does veer somewhat dovishly today,” Shaun Osborne, chief FX strategist with Scotiabank, said in a note.
There were no major Canadian economic releases due Wednesday.
The U.S. dollar index, which measures the U.S. currency against six others, fell by 0.25 per cent to 101.61, dropping for a second day in a row, according to figures from Reuters.
The euro was last up 0.3 per cent at US$1.1032, ahead of Thursday’s policy meeting by the European Central Bank.
The Australian dollar, meanwhile, gave back some of the previous session’s gains on the back of a surprise rate hike by that country’s central bank. The Australian dollar fell 0.1 per cent, after advancing 0.5 per cent on Tuesday.
In bonds, the yield on the U.S. 10-year note was lower at 3.407 per cent early Wednesday morning.
More company news
Miner Barrick Gold Corpbeat Wall Street expectations for first-quarter profit on Wednesday, as higher prices of the metal outweighed a decline in production. Average prices of gold rose 7.8% and peaked over the $2,000-mark during the reported quarter on its appeal as a safe-haven asset following a banking crisis and fears of a potential recession.
Vancouver-based retailer Aritzia Inc. says its net income for the fourth quarter was $37.3-million, up 9.1 per cent from $34.2-million a year earlier. The retailer saw its net revenue climb 43.5 per cent in the quarter ended Feb. 26 to $637.6-million. Retail net revenue rose by 38.4 per cent to $363.1-million, while e-commerce net revenue rose by 50.8 per cent to $274.5-million. Earnings per diluted share were 32 cents, up from 29 cents the same quarter a year earlier. -The Canadian Press
Ford Motor Co posted a 20% jump in first-quarter revenue, as easing supply-chain disruptions allowed it to better meet strong demand for its pickup trucks and SUVs. The automaker reaffirmed guidance for full-year adjusted earnings before interest and taxes of US$9-billion to US$11-billion and adjusted free cash flow of about US$6-billion. The results were released after Tuesday’s closing bell. -Reuters
Economic news
(8:15 a.m. ET) U.S. ADP National Employment Report for April.
(10 a.m. ET) U.S. ISM services PMI for April.
(2 p.m. ET) U.S. Fed announcement with chair Jerome Powell’s press briefing to follow.
Netflix on Thursday reported that its subscriber growth slowed dramatically during the summer, a sign the huge gains from the video-streaming service’s crackdown on freeloading viewers is tapering off.
The 5.1 million subscribers that Netflix added during the July-September period represented a 42% decline from the total gained during the same time last year. Even so, the company’s revenue and profit rose at a faster pace than analysts had projected, according to FactSet Research.
Netflix ended September with 282.7 million worldwide subscribers — far more than any other streaming service.
The Los Gatos, California, company earned $2.36 billion, or $5.40 per share, a 41% increase from the same time last year. Revenue climbed 15% from a year ago to $9.82 billion. Netflix management predicted the company’s revenue will rise at the same 15% year-over-year pace during the October-December period, slightly than better than analysts have been expecting.
The strong financial performance in the past quarter coupled with the upbeat forecast eclipsed any worries about slowing subscriber growth. Netflix’s stock price surged nearly 4% in extended trading after the numbers came out, building upon a more than 40% increase in the company’s shares so far this year.
The past quarter’s subscriber gains were the lowest posted in any three-month period since the beginning of last year. That drop-off indicates Netflix is shifting to a new phase after reaping the benefits from a ban on the once-rampant practice of sharing account passwords that enabled an estimated 100 million people watch its popular service without paying for it.
The crackdown, triggered by a rare loss of subscribers coming out of the pandemic in 2022, helped Netflix add 57 million subscribers from June 2022 through this June — an average of more than 7 million per quarter, while many of its industry rivals have been struggling as households curbed their discretionary spending.
Netflix’s gains also were propelled by a low-priced version of its service that included commercials for the first time in its history. The company still is only getting a small fraction of its revenue from the 2-year-old advertising push, but Netflix is intensifying its focus on that segment of its business to help boost its profits.
In a letter to shareholder, Netflix reiterated previous cautionary notes about its expansion into advertising, though the low-priced option including commercials has become its fastest growing segment.
“We have much more work to do improving our offering for advertisers, which will be a priority over the next few years,” Netflix management wrote in the letter.
As part of its evolution, Netflix has been increasingly supplementing its lineup of scripted TV series and movies with live programming, such as a Labor Day spectacle featuring renowned glutton Joey Chestnut setting a world record for gorging on hot dogs in a showdown with his longtime nemesis Takeru Kobayashi.
Netflix will be trying to attract more viewer during the current quarter with a Nov. 15 fight pitting former heavyweight champion Mike Tyson against Jake Paul, a YouTube sensation turned boxer, and two National Football League games on Christmas Day.
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