What every Canadian investor needs to know today

Equities

Canada’s main stock index opened down following eight straight sessions of gains with weakness in commodities prices hitting energy and mining shares. On Wall Street, key indexes were also weaker with much of the focus on earnings and Tesla results due later in the day.

At 9:30 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was down 77.49 points, or 0.37 per cent, at 20,607.19.

In the U.S., the Dow Jones Industrial Average fell 86.80 points, or 0.26 per cent, at the open to 33,889.83. The S&P 500 opened lower by 15.54 points, or 0.37 per cent, at 4,139.33, while the Nasdaq Composite dropped 89.73 points, or 0.74 per cent, to 12,063.68 at the opening bell.

“With half of the trading month now over, the U.S. stock market is still on course to post some substantial gains,” Naeem Aslam, chief investment officer with Zaye Capital, said.

“In terms of seasonality, April is the greatest month for the Dow Jones since 1950. So far this month, the index is up 2.1 per cent , and 14 trading days have elapsed. The Dow Jones index remains the market leader; the S&P 500 index is up 1 per cent, and the Nasdaq is up 0.7 per cent.”

Earnings continue to be a key driver for stocks. Shares of Netflix sank as much as 11 per cent immediately after the streaming giant’s latest results, although much of the losses were recouped in subsequent hours. The stock was down less than 1 per cent in the predawn period.

The company offered a mixed earnings picture in its latest quarter, giving a weaker forecast although it topped earnings estimates in the most recent period. From January through March, Netflix added 1.75 million streaming subscribers, missing analyst estimates of 2.06 million additions. As well, Netflix said it was delaying the expansion of its crackdown on password sharing. The program was launched in 12 countries earlier this year.

On Wednesday, investors got results from Morgan Stanley this morning and will get Tesla’s earnings after the closing bell.

“[Tesla] announced more price reduction for its vehicles ahead of reporting,” Mr. Aslam said in a note. “It demonstrates that the firm has recognized that its competitive advantage has eroded, and that in order to fight for a larger part of the market, it must first comprehend the mechanism of competition.”

Wednesday afternoon, U.S. investors will also get the Federal Reserve’s Beige Book offering a snapshot of regional economic conditions.

In Canada, earnings also continue with results from Montreal-based grocery store operator Metro Inc. The sector has made headlines in recent months as spiking inflationary pressures raised questions about how costs were being passed on to consumers. On Tuesday, Statistics Canada reported that the annual rate of inflation eased to 4.3 per cent in March while the rise in food prices slowed.

Ahead of the opening bell, Metro reported net earnings of $218.8-million or 93 cents per share, compared to $198.1-million or 84 cents per share in the same period the prior year. Sales totalled $4.55-billion, up from $4.27-billion in the same quarter last year.

Elsewhere, The Globe’s Eric Reguly reports Glencore has intensified its battle for Teck Resources by dangling the prospect of a higher bid as long as shareholders reject the Canadian company’s proposal to split the company in two next week. In an open letter pitched Wednesday morning to Teck’s Class B shareholders, who own almost all the equity but few of the votes, Glencore CEO Gary Nagle said that, should the vote go against Teck, his company would open negotiations directly with shareholders.

Overseas, the pan-European STOXX 600 was down 0.29 per cent in afternoon trading. Britain’s FTSE 100 slid 0.21 per cent. Germany’s DAX and France’s CAC 40 were off 0.18 per cent and 0.03 per cent, respectively.

In Asia, Japan’s Nikkei finished down 0.18 per cent. Hong Kong’s Hang Seng slid 1.37 per cent.

Commodities

Crude prices were down despite a decline in U.S. inventories with concerns about the path of Fed rate hikes weighing on sentiment.

The day range on Brent was US$82.91 to US$85.15 in the early premarket period. The range on West Texas Intermediate was US$79.04 to US$81.18.

“Outside of the China deflation risk, oil’s other significant downside risk is an extension of the Fed tightening cycle beyond the 25 basis points markets expect in May,” Stephen Innes, managing partner with SPI Asset Management, said.

Atlanta Fed President Raphael Bostic told CNBC yesterday that the Fed likely has one more rate hike ahead of it in its battle against inflation before taking “a step back and see how our policy is flowing through the economy.” However, St. Louis Fed chief James Bullard told Reuters in an interview that he leans toward 75 basis points of additional tightening.

Markets have now priced in a more than 80-per-cent chance of a quarter point increase by the Fed at its meeting next month.

Meanwhile, prices drew some support from the latest weekly inventory figures from the American Petroleum Institute. The report showed crude stocks fell by 2.68 million last week. Gasoline and distillate inventories also declined.

U.S. government figures for the week are due later this morning.

In other commodities, spot gold was down 0.6 per cent at US$1,993.99 per ounce early Wednesday morning with a slightly stronger U.S. dollar applying downward pressure. U.S. gold futures slid 0.8 per cent to US$2,003.30.

Currencies

The Canadian dollar was down in early trading while its U.S. counterpart ticked higher as traders with the outlook for future rate hikes by the Fed.

The day range on the loonie was 74.48 US cents to 74.72 US cents in the early premarket period.

“BoC Governor Macklem told Canadian parliamentarians yesterday afternoon that higher rates can’t be ruled out while policy may need to stay higher for longer until inflation cools,” Shaun Osborne, chief FX strategist with Scotiabank, said. “The ‘no rate cut this year’ messaging from the BoC since last week’s policy decision seems to be resonating with markets.”

There were no major Canadian economic releases due on Wednesday.

On world markets, the U.S. dollar index, which gauges the greenback against six major peers, rose 0.22 per cent to 101.94, according to figures from Reuters.

On Friday, the index hit to a one-year low at 100.78.

Elsewhere, Britain’s pound advanced against the greenback after new figures showed inflation remained above 10 per cent in March. The annual rate of inflation in Britain was 10.1 per cent last month, down slightly from 10.4 per cent in February.

The pound was last up 0.25 per cent at US$1.2454, approaching the 10-month high seen last week.

The euro dipped 0.12 per cent to US$1.09605, still in sight of last week’s 14-month high, Reuters reported.

In bonds, the yield on the U.S. 10-year note was higher at 3.62 per cent ahead of the North American open.

More company news

Morgan Stanley’s first-quarter profit fell as its mainstay investment banking business remained under pressure due to a prolonged slump in dealmaking. Profit applicable to the bank’s common shareholders for the three months ended Mar. 31 fell to US$2.83-billion, or US$1.70 per diluted share, the bank said on Wednesday. That compares to US$3.54-billion, or US$2.02 per diluted share, a year earlier.

Chemical maker Chemours Co said on Wednesday it has partnered with TC Energy Corp to develop two clean hydrogen production facilities in West Virginia. Clean hydrogen, made using renewable energy to power electrolyzers to convert water, is being backed by many governments for vehicles and energy plants, but it is currently too expensive for widespread use. The facilities would be located at or near Chemours’ Washington Works and Belle manufacturing sites in West Virginia, the company said.

Economic news

(8:15 a.m. ET) Canadian housing starts for March.

(8:30 a.m. ET) Canadian industrial product and raw materials price indexes for March.

(8:30 a.m. ET) Canadian consumer and mortgage credit for February.

(2 p.m. ET) U.S. Beige Book is released.

With Reuters and The Canadian Press

Editor’s note: Canada’s annual inflation rate in March has been corrected in this article.

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