Pedestrians walk along Wall Street in the shadows of the buildings near the New York Stock Exchange.Photo by Michael Nagle/Bloomberg
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TSX, U.S. markets retreat sharply as inflation shatters ‘hopes and dreams’
Stocks were rocked by hotter-than-expected U.S. inflation data Tuesday as financial markets brace for the possibility that the United States Federal Reserve may keep interest rates higher for longer than hoped.
The S&P 500 Index is down 1.6 per cent after core U.S. consumer prices climbed by most in eight months. If that drop holds into the close, it will mark the gauge’s worst CPI-day since 2022, according to data compiled by Bloomberg. The Dow Jones industrial average fell 1.88 per cent, while the Nasdaq composite dropped 2.24 per cent.
In Toronto, the S&P/TSX composite index was down 2.44 per cent, or 514.15 points.
“The concern (for bank stocks) is that the later the Fed begins with rate cuts, the greater the chance of a recession,” Wells Fargo’s Mike Mayo, the veteran banks stocks analyst, said by phone. “There’s very clear sentiment impact, and then the question is what degree does sentiment drive reality?”
Trading is turbulent as markets come to grips with the already-slim chances of the Fed lowering borrowing costs soon getting even slimmer. Indeed, these figures give the Fed ammunition to delay interest-rate cuts beyond what market was anticipating. Traders are responding, with swaps moving the pricing of rate cuts to July from June.
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Article content“There was a lot of hopes and dreams and hype in the market, and investors’ expectations will most likely reset after today’s CPI report,” Michael O’Rourke, chief market strategist at Jones Trading, said by phone. “It’s a notable step backwards, and you can’t ignore that. Today’s report pushed back everyone’s hopes for a rate cut to summer at best.”
The S&P 500 is approaching a technical roadblock after eclipsing 5,000 for the first time last week. The index is coming off five straight weeks of gains, rising in 14 of the last 15 weeks — something it hasn’t done since 1972.
— Bloomberg
4:40 p.m.
TSX tumbles almost 500 points, U.S. stock markets also fall
Canada’s main stock index lost more than two per cent on a broad-based decline, following U.S. markets as they slid on news that inflation in January was hotter than expected.
The S&P/TSX composite index closed down 482.33 points at 20,584.97.
In New York, the Dow Jones industrial average was down 524.63 points at 38,272.75. The S&P 500 index was down 68.67 points at 4,953.17, while the Nasdaq composite was down 286.95 points at 15,655.60.
The Canadian dollar traded for 73.77 cents U.S. compared with 74.35 cents U.S. on Monday.The March crude oil contract was up 95 cents at US$77.87 per barrel and the March natural gas contract was down eight cents at US$1.69 per mmBTU.
The April gold contract was down US$25.80 at US$2,007.20 an ounce and the March copper contract was down a cent at US$3.71 a pound.
— The Canadian Press
4 p.m.
Oil rises as OPEC demand outlook helps push past technical level
Pumpjacks draw out oil and gas from wellheads near Calgary.Photo by Jeff McIntosh/THE CANADIAN PRESS files
Oil rose after a bullish demand outlook from OPEC helped crude surpass a key technical level that had served as the ceiling of this year’s narrow trading band.
West Texas Intermediate rose 1.5 per cent to top US$78 a barrel, pushing past its 200-day moving average of about US$77.40. With bulls also finding support from OPEC’s projections that global oil demand will continue strong growth this year, the breach above the technical threshold raises the possibility of additional upward momentum.
Crude prices also gathered support from the Standard & Poor’s 500 Index paring intraday losses. Still, broader risk-off sentiment capped crude’s gains after U.S. data showed inflation remains elevated, reducing the prospect of imminent interest rate cuts.
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Article contentWhile oil has advanced this year, it’s yet to break decisively higher. The OPEC cuts, as well as nervousness over the conflict in the Middle East and attacks on shipping in the Red Sea, have largely been offset by an uncertain demand outlook and ample output from outside the group.
British Columbia Premier David Eby.Photo by Darryl Dyck/THE CANADIAN PRESS files
British Columbia Premier David Eby says the private market can’t solve the province’s housing crisis, as his government launches an almost $3 billion public housing program to build more affordable rental units for middle-income earners.
The New Democrat government says the BC Builds program will target land owned by governments, community and non-profits and provide low-cost financing to fast-track rental property developments on underutilized lands in communities across the province.
Eby says the strategy stands in contrast to the “predictable” outcomes when government exited the housing market, “speculators ran wild” and prices and rents rose.
The government hasn’t provided estimates of the numbers of rental units it expects the program will develop, but says it has already identified 20 sites with the potential to build up to 4,000 rental units.
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Article contentEby says they are aiming for a concept-to-construction timeline of 12 to 18 months to build the housing, compared with the current three-to-five-year average to complete rental projects.
He says the BC Builds program is part of the NDP government’s housing strategy, which now totals $19 billion and includes last year’s initiatives to restrict short-term rentals, relax zoning regulations to permit more multi-residential housing developments and build more homes along transit corridors.
The BC Builds announcement comes just ahead of the start of its spring legislative session next week and the introduction of the government’s budget on Feb. 22, with a provincial election set for the fall.
— The Canadian Press
1:27 p.m.
Auto parts company Magna International announces share buyback plan
An employee assembles a bumper at the Magna International Inc. Polycon Industries auto parts manufacturing facility in Guelph, Ont.Photo by Cole Burston/Bloomberg files
Magna International Inc. says it may buy back up to 300,000 of its common shares under its normal course issuer bid over the coming year.
The auto parts company says the bid will start on Thursday and will end no later than Feb. 14, 2025.
Magna says it may purchase the shares if it believes that the market price is attractive and that the purchase would be an appropriate use of corporate funds and in its best interests.
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Article contentIt had 286,780,238 issued and outstanding common shares as of Feb. 1.
Under Magna’s buy back plan announced in November 2022, the company bought 245,904 common shares by the time the plan ended on Nov. 14, 2023.
By buying back shares, a company spreads its profits over fewer shares. That increases its earnings per share, a key ratio used to determine a company’s financial health and investment rating.
— The Canadian Press
Noon
Midday markets: TSX falls almost 350 points as stocks rocked by U.S. inflation numbers
Canada’s main stock index was down almost 350 points in early afternoon trading in a broad-based decline, while U.S. stock markets also fell after a hotter-than-expected United States inflation report.
The S&P/TSX composite index was down 346.18 points, or 1.64 per cent, at 20,713.58.
In New York, the Dow Jones industrial average was down 444.47 points, 1.15 per cent, at 38,350.59. The S&P 500 index was down 51.38 points, 1.02 per cent, at 4,970.40, while the Nasdaq composite was down 225.78 points, 1.41 per cent, at 15,718.86.
The Canadian dollar traded for 73.73 cents US, down 0.82 per cent, compared with 74.35 cents US on Monday.
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Article contentThe March crude oil contract was up 1.24 per cent at US$77.87 per barrel and the March natural gas contract was down nine cents at US$1.68 per mmBTU.
The April gold contract was down 1.24 per cent at US$2,007.80 an ounce and the March copper contract was up less than a penny at US$3.73 a pound.
— The Canadian Press
11:00 a.m.
Cascades to close three plants, affecting 310 workers
Cascades is closing three plants and cutting jobs.Photo by Jim Wells/Postmedia
Cascades Inc. is closing three plants as part of changes to its containerboard operations that will affect 310 employees.
The paper and packaging company says its corrugated medium mill in Trenton, Ont., that is currently idled will not restart operations, while converting plants in Belleville, Ont., and Newtown, Conn., will close by May 31.
It says it decided to close the facilities due to a combination of market conditions, higher operating costs, aging technology and the need for significant capital investment.
Cascades will work with the impacted employees to mitigate, where possible, the effect of the closures.
Employees who cannot or do not wish to relocate to other plants will receive support in their search for other employment, the company says.
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Article contentCascades will record $61 million in impairment and environmental obligation charges associated with the closures in the fourth quarter of its 2023 financial results as well as about $35 million in additional restructuring charges in the coming years.
— The Canadian Press
10:45 a.m.
Ottawa unveils more housing deals with cities across the country
Minister of Housing, Infrastructure and Communities Sean Fraser holds ups booklet of housing plans during a news conference, Tuesday, Dec. 12, 2023 in Ottawa.Photo by Adrian Wyld/The Canadian Press
Minister of Housing Sean Fraser says the federal government will roll out more than 60 housing agreements with small and rural communities across the country over the next few weeks.
Fraser said in a news conference this morning that the deals are worth $176 million and will help build more than 50,000 housing units over the next decade.
Ottawa has been signing agreements directly with municipalities through its housing accelerator fund, which offers money in exchange for changes to bylaws and regulations that would support more homebuilding.
The Liberal government has pitched the fund as a key pillar of its economic plan as it faces political pressure to address the country’s housing crisis.
Fraser says on top of the deals for smaller communities, the federal government has reached 36 agreements to date that will help construct more than 500,000 housing units over the next decade.
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Article contentThat includes a deal with the city of Ottawa worth $176 million announced on Monday.
— The Canadian Press
10:23 a.m.
Markets open: Stocks fall on inflation reality check
Wall Street got a reality check on Tuesday, with a hotter-than-estimated inflation data triggering a slide in both stocks and bonds.
Equities moved away from their all-time highs after the core consumer price index topped estimates and climbed the most in eight months. Treasuries sold off across the curve, with two-year yields hitting the highest since before the December United States Federal Reserve “pivot.” Fed swaps shifted the full pricing of a rate cut to July from June. And a measure of perceived risk in the U.S. investment-grade corporate bond market soared.
The consumer price index data came as a disappointment after a recent downdraft in price pressures that helped build expectations for rate cuts this year. Though the numbers give credence to the wait-and-see approach highlighted by Fed chair Jerome Powell and a drumbeat of central bank speakers.
In New York, the S&P 500 was down 1.44 per cent at 4,950.02. The Dow Jones industrial average fell 1.21 per cent to 38,327.85 while the Nasdaq composite was down 1.45 per cent 15,712.39
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Article contentIn Toronto, the S&P/TSX composite index fell 1.83 per cent 20,683.31.
— Bloomberg
9:32 a.m.
Tim Hortons parent Restaurant Brands reports Q4 profit and revenue up
Dutchies at the Tim Hortons test kitchen in Toronto.Photo by Chris Young/The Canadian Press files
The parent company of Tim Hortons, Burger King and other brands, which keeps its books in U.S. dollars, says its net income totalled US$726 million or $1.60 per diluted share.
The result was up from US$336 million or 74 cents US per diluted share for the last three months of 2022.
The company says the increase was driven by a larger income tax benefit and increased income from operations, partially offset by higher interest costs.
On an adjusted basis, Restaurant Brands says it earned 75 cents US per diluted share in its most recent quarter, up from 72 cents US per diluted share a year earlier.
Revenue totalled US$1.82 billion, up from US$1.69 billion in the same quarter a year earlier.
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U.S. inflation remains well above the Federal Reserve’s two per cent target.Photo by Charly Triballeau/AFP via Getty Images
Annual inflation in the United States cooled last month yet remained elevated in the latest sign that the pandemic-fuelled price surge is only gradually and fitfully coming under control.
Tuesday’s report from the Labor Department showed that the consumer price index rose 0.3 per cent from December to January, up from a 0.2 per cent increase the previous month. Compared with a year ago, prices are up 3.1 per cent.
That is less than the 3.4 per cent figure in December and far below the 9.1 per cent inflation peak in mid-2022. Yet the latest reading is still well above the United States Federal Reserve’s two per cent target level at a time when public frustration with inflation has become a pivotal issue in President Joe Biden’s bid for re-election
Excluding the volatile food and energy categories, so-called core prices climbed 0.4 per cent last month, up from 0.3 per cent in December and 3.9 per cent over the past 12 months. Core inflation is watched especially closely because it typically provides a better read of where inflation is likely headed. The annual figure is the same as it was in December.
Shopify profit and sales narrowly beat estimates, but shares fall
The Shopify logo outside the company’s headquarters in Ottawa. Shopify’s latest results beat estimates.Photo by David Kawai/Bloomberg
Shopify Inc. reported sales and profit for the fourth quarter that narrowly beat analysts’ estimates, but that didn’t impress Wall Street after the stock more than doubled last year.
Revenue for the period rose 24 per cent to US$2.1 billion, beating the US$2.08-billion average estimate of analysts surveyed by Bloomberg. Profit, excluding one-time items, was 34 cents U.S. a share, above the 30-cent U.S. expectation.
Shopify fell about nine per cent in U.S. premarket trading. The company said it expects a free cash flow margin in the current quarter in the “high single digits,” while analysts were expecting 13.6 per cent. That miss “stands out as the only negative indicator and may be behind the stock dropping,” Anurag Rana, an analyst at Bloomberg Intelligence, wrote in a note.
Shopify said that revenue in the current quarter would grow at a “low-20s percentage rate.” The company said that would translate into a year-over-year rate in the mid-to-high twenties when adjusting for the sale of its logistics business.
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Article contentThe Ottawa-based company raised software prices for online merchants earlier this month, a move that’s expected to generate more than US$100 million in additional revenue this year without driving away many customers. Shopify is in its first year of a deal with Amazon.com Inc. to let merchants use its “Buy With Prime” delivery service. Shopify sold its own logistics business to freight-forwarding startup Flexport last year.
Gross merchandise volume, the overall value of merchant sales across Shopify’s systems, increased 23 per cent to US$75.1 billion, above Wall Street projections of US$71.6 billion.
BlackBerry to cut more jobs, close offices to contain costs
BlackBerry is taking action to streamline costs, including cutting jobs, as part of the ongoing process to separate two of its business divisions.Photo by Andrew Ryan/The Canadian Press
BlackBerry Ltd. says it’s taking action to streamline costs, including cutting jobs, as part of the ongoing process to separate two of its business divisions.
The Waterloo, Ont.-based technology company said last quarter it cut around 200 jobs as part of efforts to slash costs.
This quarter, the company said it anticipates further job losses within its cybersecurity business, which it expects to generate annualized savings of around US$27 million.
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Article contentIt’s also taking other steps to save money, including exiting six of its 36 global office locations.
The company said it expects to return to positive cash flow by the fourth quarter of its 2025 financial year.
BlackBerry reported a loss of US$21 million in its third quarter ended Nov. 30.
— The Canadian Press
7:30 a.m.
Stock markets before the opening bell
United States equity futures slumped before the release of keenly awaited inflation data that could set the stage for the timing of the Federal Reserve move to interest-rate cuts. Treasuries rose.
Contracts on the rate-sensitive Nasdaq 100 slid 0.6 per cent while those on the S&P 500 fell 0.4 per cent, extending Monday’s decline in the main U.S. stock gauge from a high of near 5,050. Nvidia Corp. dropped one per cent in premarket trading.
The inflation report, which is expected to show the first reading below three per cent on year-over-year headline inflation since March 2021, may not be enough to justify a more rapid shift to monetary easing. Employment, manufacturing and economic growth in the U.S. have surprised on the upside, proving resilient to the fastest rate increases in a generation.
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Article content“Despite expecting CPI to print below three per cent later, we still think the market is over-exuberant when it comes to when that first cut comes in,” Grace Peters, head of global investment strategy at JPMorgan Private Bank, said in an interview with Bloomberg TV.
The S&P/TSX composite index closed up 0.27 per cent on Monday.
— Bloomberg
What to watch today
The CRTC hosts a five-day hearing for its review of the wholesale high-speed access framework.
Finance Minister Chrystia Freeland will provide an update on the government’s economic plan in Ottawa in. Housing Minister Sean Fraser, Employment Minister Randy Boissonnault and Gudie Hutchings, minister of rural economic development, will join her.
The Financial Accountability Office of Ontario will release a report that provides an updated outlook for the provincial economy and the province’s finances on the website at fao-on.org/en. At 10 a.m. senior officials from the FAO will provide a brief presentation and answer technical questions.
Fresh U.S. inflation data drops this morning with the release of the consumer price index for January.
Companies reporting earnings today include Shopify Inc., Restaurant Brands International Inc., Hydro One Ltd., Coca-Cola Co., Airbnb Inc., Moody’s Corp. and Dream Industrial Real Estate Investment Trust.
Telus Corp. says it is avoiding offering “unprofitable” discounts as fierce competition in the Canadian telecommunications sector shows no sign of slowing down.
The company said Friday it had fewer net new customers during its third quarter compared with the same time last year, as it copes with increasingly “aggressive marketing and promotional pricing” that is prompting more customers to switch providers.
Telus said it added 347,000 net new customers, down around 14.5 per cent compared with last year. The figure includes 130,000 mobile phone subscribers and 34,000 internet customers, down 30,000 and 3,000, respectively, year-over-year.
The company reported its mobile phone churn rate — a metric measuring subscribers who cancelled their services — was 1.09 per cent in the third quarter, up from 1.03 per cent in the third quarter of 2023. That included a postpaid mobile phone churn rate of 0.90 per cent in its latest quarter.
Telus said its focus is on customer retention through its “industry-leading service and network quality, along with successful promotions and bundled offerings.”
“The customers we have are the most important customers we can get,” said chief financial officer Doug French in an interview.
“We’ve, again, just continued to focus on what matters most to our customers, from a product and customer service perspective, while not loading unprofitable customers.”
Meanwhile, Telus reported its net income attributable to common shares more than doubled during its third quarter.
The telecommunications company said it earned $280 million, up 105.9 per cent from the same three-month period in 2023. Earnings per diluted share for the quarter ended Sept. 30 was 19 cents compared with nine cents a year earlier.
It reported adjusted net income was $413 million, up 10.7 per cent year-over-year from $373 million in the same quarter last year. Operating revenue and other income for the quarter was $5.1 billion, up 1.8 per cent from the previous year.
Mobile phone average revenue per user was $58.85 in the third quarter, a decrease of $2.09 or 3.4 per cent from a year ago. Telus said the drop was attributable to customers signing up for base rate plans with lower prices, along with a decline in overage and roaming revenues.
It said customers are increasingly adopting unlimited data and Canada-U.S. plans which provide higher and more stable ARPU on a monthly basis.
“In a tough operating environment and relative to peers, we view Q3 results that were in line to slightly better than forecast as the best of the bunch,” said RBC analyst Drew McReynolds in a note.
Scotiabank analyst Maher Yaghi added that “the telecom industry in Canada remains very challenging for all players, however, Telus has been able to face these pressures” and still deliver growth.
The Big 3 telecom providers — which also include Rogers Communications Inc. and BCE Inc. — have frequently stressed that the market has grown more competitive in recent years, especially after the closing of Quebecor Inc.’s purchase of Freedom Mobile in April 2023.
Hailed as a fourth national carrier, Quebecor has invested in enhancements to Freedom’s network while offering more affordable plans as part of a set of commitments it was mandated by Ottawa to agree to.
The cost of telephone services in September was down eight per cent compared with a year earlier, according to Statistics Canada’s most recent inflation report last month.
“I think competition has been and continues to be, I’d say, quite intense in Canada, and we’ve obviously had to just manage our business the way we see fit,” said French.
Asked how long that environment could last, he said that’s out of Telus’ hands.
“What I can control, though, is how we go to market and how we lead with our products,” he said.
“I think the conditions within the market will have to adjust accordingly over time. We’ve continued to focus on digitization, continued to bring our cost structure down to compete, irrespective of the price and the current market conditions.”
Still, Canada’s telecom regulator continues to warn providers about customers facing more charges on their cellphone and internet bills.
On Tuesday, CRTC vice-president of consumer, analytics and strategy Scott Hutton called on providers to ensure they clearly inform their customers of charges such as early cancellation fees.
That followed statements from the regulator in recent weeks cautioning against rising international roaming fees and “surprise” price increases being found on their bills.
Hutton said the CRTC plans to launch public consultations in the coming weeks that will focus “on ensuring that information is clear and consistent, making it easier to compare offers and switch services or providers.”
“The CRTC is concerned with recent trends, which suggest that Canadians may not be benefiting from the full protections of our codes,” he said.
“We will continue to monitor developments and will take further action if our codes are not being followed.”
French said any initiative to boost transparency is a step in the right direction.
“I can’t say we are perfect across the board, but what I can say is we are absolutely taking it under consideration and trying to be the best at communicating with our customers,” he said.
“I think everyone looking in the mirror would say there’s room for improvement.”
This report by The Canadian Press was first published Nov. 8, 2024.
CALGARY – TC Energy Corp. has lowered the estimated cost of its Southeast Gateway pipeline project in Mexico.
It says it now expects the project to cost between US$3.9 billion and US$4.1 billion compared with its original estimate of US$4.5 billion.
The change came as the company reported a third-quarter profit attributable to common shareholders of C$1.46 billion or $1.40 per share compared with a loss of C$197 million or 19 cents per share in the same quarter last year.
Revenue for the quarter ended Sept. 30 totalled C$4.08 billion, up from C$3.94 billion in the third quarter of 2023.
TC Energy says its comparable earnings for its latest quarter amounted to C$1.03 per share compared with C$1.00 per share a year earlier.
The average analyst estimate had been for a profit of 95 cents per share, according to LSEG Data & Analytics.
This report by The Canadian Press was first published Nov. 7, 2024.
BCE Inc. reported a loss in its latest quarter as it recorded $2.11 billion in asset impairment charges, mainly related to Bell Media’s TV and radio properties.
The company says its net loss attributable to common shareholders amounted to $1.24 billion or $1.36 per share for the quarter ended Sept. 30 compared with a profit of $640 million or 70 cents per share a year earlier.
On an adjusted basis, BCE says it earned 75 cents per share in its latest quarter compared with an adjusted profit of 81 cents per share in the same quarter last year.
“Bell’s results for the third quarter demonstrate that we are disciplined in our pursuit of profitable growth in an intensely competitive environment,” BCE chief executive Mirko Bibic said in a statement.
“Our focus this quarter, and throughout 2024, has been to attract higher-margin subscribers and reduce costs to help offset short-term revenue impacts from sustained competitive pricing pressures, slow economic growth and a media advertising market that is in transition.”
Operating revenue for the quarter totalled $5.97 billion, down from $6.08 billion in its third quarter of 2023.
BCE also said it now expects its revenue for 2024 to fall about 1.5 per cent compared with earlier guidance for an increase of zero to four per cent.
The company says the change comes as it faces lower-than-anticipated wireless product revenue and sustained pressure on wireless prices.
BCE added 33,111 net postpaid mobile phone subscribers, down 76.8 per cent from the same period last year, which was the company’s second-best performance on the metric since 2010.
It says the drop was driven by higher customer churn — a measure of subscribers who cancelled their service — amid greater competitive activity and promotional offer intensity. BCE’s monthly churn rate for the category was 1.28 per cent, up from 1.1 per cent during its previous third quarter.
The company also saw 11.6 per cent fewer gross subscriber activations “due to more targeted promotional offers and mobile device discounting compared to last year.”
Bell’s wireless mobile phone average revenue per user was $58.26, down 3.4 per cent from $60.28 in the third quarter of the prior year.
This report by The Canadian Press was first published Nov. 7, 2024.
