Canada’s main stock index opened down Tuesday with lower crude prices pressuring energy stocks. On Wall Street, key indexes were also in the red at the start of trading amid a flood of corporate results.
At 9:31 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was down 66.99 points, or 0.32 per cent, at 20,609.75.
In the U.S., the Dow Jones Industrial Average fell 47.06 points, or 0.14 per cent, at the open to 33,828.34. The S&P 500 opened lower by 10.61 points, or 0.26 per cent, at 4,126.43, while the Nasdaq Composite dropped 68.40 points, or 0.57 per cent, to 11,968.81 at the opening bell.
Earnings continued to dominate on Tuesday, with the first of a slew of big tech results this week due after the bell when Alphabet and Microsoft report. Alphabet stock is up about 20 per cent so far this year while Microsoft has gained about 17 per cent, Michael Hewson, chief market analyst with CMC Markets U.K., notes.
“With Facebook owner Meta Platforms due tomorrow and Amazon on Thursday, any disappointment here could well prompt investors to reassess earnings expectations over the course of the rest of the year,” Mr. Hewson said.
“That being said it’s more likely that this week’s earnings numbers could merely shift the markets focus to next week’s Fed meeting when we are likely to see another 25-basis-point rate hike.”
U.S. investors also got results this morning from McDonald’s and General Motors among others.
In Canada, West Fraser Timber and construction company Aecon report after the close.
Meanwhile, Canadian National Railway Co. reported record first-quarter revenue, helped by higher crude prices and a bumper grain crop.
CN posted revenue of $4.31-billion for the quarter ended March 31, up 16 per cent from $3.71-billion a year earlier. On an adjusted basis, diluted earnings per share rose 38 per cent to $1.82 from $1.32 a year ago, topping analysts’ forecasts of $1.72 per share, according to financial data firm Refinitiv.
Overseas, the pan-European STOXX 600 was down 0.32 per cent by midday. Britain’s FTSE 100 fell 0.14 per cent. Germany’s DAX was flat and France’s CAC 40 slid 0.57 per cent and 0.61 per cent, respectively.
In Asia, Japan’s Nikkei edged up 0.09 per cent. Hong Kong’s Hang Seng dropped 1.71 per cent.
Commodities
Crude prices turned negative ahead of the release of the latest U.S. weekly inventory figures.
The day range on Brent was US$82.44 to US$83.06 in the early premarket period. The range on West Texas Intermediate was US$78.49 to US$79.07.
“Time will tell whether OPEC+ decision to cut output will push oil prices back to US$100 as some feared but it doesn’t look particularly promising at this point,” OANDA senior analyst Craig Erlam said.
“The economic outlook has deteriorated but the degree to which that is the case is still unclear.”
Later in the day, the American Petroleum Institute reports its weekly inventory numbers. More official U.S. government figures will follow on Wednesday morning.
Analysts expect to see U.S. inventories fall by 1.7 million barrels last week.
Meanwhile, Reuters reports that bookings in China for trips abroad during the upcoming May Day holiday signal an ongoing recovery in travel to Asian countries.
“Investors expressed optimism that Chinese holiday travel would boost fuel demand in the world’s largest oil importer,” Leon Li, an analyst at CMC Markets, said.
In other commodities, spot gold was steady at US$1,988.27 per ounce early Tuesday morning, while U.S. gold futures was unchanged at US$1,999.40.
“The uncertainty over the outlook has seen the rally stall just shy of record highs and while traders don’t seem particularly keen to give up on it, the fact that interest rate expectations have become slightly more hawkish recently has made rediscovering momentum challenging,” Mr. Erlam said.
Currencies
The Canadian dollar was lower while its U.S. counterpart rose against a group of world currencies as risk sentiment weakened.
The day range on the loonie was 73.58 US cents to 73.94 US cents in the early premarket period. Over the past month, the Canadian dollar is up about 0.22 per cent against the greenback.
“The CAD is struggling again as risk appetite weakens and investors shy away from commodity FX,” Shaun Osborne, chief FX strategist with Scotiabank, said.
There were no major Canadian economic releases due Tuesday.
On world markets, the U.S. dollar index was last up 0.2 per cent at 101.48 in a flight to safety as worries about the health of the financial system resurfaced following earnings from First Republic Bank and UBS, Reuters reported.
The euro was down about 0.2 per cent against the U.S. dollar but still holding above US$1.10. The euro has gained about 1.7 per cent so far in April.
Britain’s pound was down 0.2 per cent at US$1.2463, but not far from the 10-month high of US$1.2545 reached earlier this month, according to figures from Reuters.
In bonds, the yield on the U.S. 10-year note was lower at 3.449 per cent in the predawn period.
More company news
McDonald’sglobal comparable sales rose 12.6 per cent in the first quarter, it said on Tuesday, blasting past Wall Street estimates as the burger chain banked on higher menu prices and more customer visits. Sales also rose by the same 12.6 per cent for all of McDonald’s Corp’s geographical segments. Analyst had expected an 8.54 per cent rise globally, according to Refinitiv IBES data. –Reuters
General Motors Co on Tuesday lifted its full-year profit and cash flow forecasts, citing stronger-than-expected demand and higher prices, even as pre-tax profits for the first quarter fell. The No. 1 U.S. automaker said it expects full-year pre-tax profits in a range between US$11-billion and US$13-billion, up US$500-million from a prior forecast. –Reuters
First Republic Bank shares sank more than 20 per cent just after Tuesday’s opening bell after the U.S. lender said deposits plunged by more than US$100-billion in the first quarter and it was exploring options such as restructuring its balance sheet. The deposit slump overshadowed profits that beat expectations for the beleaguered lender, which was shored up through an injection of deposits by larger U.S. banks last month after the collapse of two U.S. regional lenders. The bank plans to slash expenses by cutting executive compensation, paring back office space, and laying off nearly 20% to 25% of employees in the second quarter, it said Monday. –Reuters
UBS Group set aside more money to draw a line under its involvement in toxic mortgages, dealing a heavy blow to first-quarter profit as it prepares to integrate fallen rival Credit Suisse. Switzerland’s biggest bank reported a 52-per-cent slide in quarterly profit, having set aside a further US$665-million to cover the costs of the U.S. residential mortgage-backed securities that played a central role in the global financial crisis. –Reuters
PepsiCo Inc on Tuesday raised its annual revenue and profit forecasts, betting on steady demand for its sodas and snacks as well as price hikes to offset rising costs. The company said it expects 2023 organic revenue to rise 8%, compared with its prior forecast of a 6% increase. PepsiCo now sees annual core earnings per share of $7.27, compared with $7.20 earlier. –Reuters
3M Co said on Tuesday it would cut about 6,000 positions globally as the U.S. industrial conglomerate looks to restructure its business amid waning demand and increasing costs. Shares of the St. Paul, Minnesota-based company were up 1.6% at $106.7 premarket. –Reuters
Economic news
(9 a.m. ET) U.S. S&P CoreLogic Case-Shiller Home Price Index (20 city) for February.
(9 a.m. ET) U.S. FHFA House Price Index for February.
(10 a.m. ET) U.S. new home sales for March.
With Reuters and The Canadian Press
(10 a.m. ET) U.S. Conference Board Consumer Confidence Index for April.
In an effort to address economic disparities and promote entrepreneurship among Black communities, Canada introduced the Federal Black Entrepreneurship Program (FBEP) and the associated Black Entrepreneurship Loan Fund (BEFL). However, recent revelations have brought to light a shocking reality: the underutilization and obstacles faced by Black businesses in accessing the FACE (Funding for Black Entrepreneurship) loans. In this thought-provoking article, we delve into the numbers and uncover the challenges and experiences of Black entrepreneurs in navigating these loan programs. Through interviews with business owners, experts, and advocates, we shed light on the systemic barriers that hinder their success and explore potential solutions for a more equitable and inclusive lending landscape.
The FACE loan program was created with the intention of providing financial support and resources to Black-owned businesses. However, the reality has been far from the expected outcomes. Jessica Thompson, an economist specializing in racial disparities, states, “The FACE loan program was designed to address historical economic disadvantages, but the numbers reveal a significant gap between its objectives and the lived experiences of Black entrepreneurs.”
Black entrepreneurs face numerous hurdles when attempting to access FACE loans. A lack of awareness about the program, complex application processes, and limited outreach to communities in need contribute to low participation rates. Michael Johnson, a business owner, shares his frustration, saying, “It’s disheartening to see a program that was meant to uplift Black businesses fall short due to bureaucratic obstacles. Many of us struggle to navigate the application process and meet the stringent criteria.”
Systemic barriers and discrimination persist within the lending landscape, perpetuating the cycle of inequality. Dr. Maya Williams, a sociologist specializing in racial disparities, explains, “Structural racism and bias continue to disadvantage Black entrepreneurs. Discrimination in loan approvals, higher interest rates, and limited access to capital contribute to the challenges faced by Black-owned businesses.”
The consequences of the FACE loan program’s shortcomings are far-reaching. Many Black-owned businesses struggle to access the capital needed for growth, expansion, and operational sustainability. Tanya Campbell, a business owner, emphasizes, “The lack of financial support hampers our ability to scale our businesses, hire employees, and contribute to the local economy. It perpetuates a cycle of limited opportunities and restricted growth.”
To address the disparities within the FACE loan program, experts and advocates propose several solutions. Improved outreach and community engagement, simplified application processes and tailored support services can increase access and awareness among Black entrepreneurs. John Stevens, a business consultant, suggests, “The government must invest in targeted initiatives that address the specific needs and challenges faced by Black-owned businesses, such as mentorship programs, financial literacy training, and capacity-building initiatives.”
Addressing the challenges faced by Black entrepreneurs requires collaboration and accountability from various stakeholders. Governments, financial institutions, and community organizations must work together to create an inclusive lending ecosystem. Mary Johnson, an advocate for Black economic empowerment, states, “Transparency, accountability, and ongoing dialogue between policymakers, lenders, and Black entrepreneurs are essential to drive meaningful change and ensure equal opportunities for all.”
The FACE loan program aimed to empower Black entrepreneurs and address economic disparities, but the reality falls short of expectations. The underutilization and obstacles faced by Black businesses in accessing FACE loans highlight the pressing need for systemic change within the lending landscape. By acknowledging and addressing the structural barriers, streamlining processes, and fostering collaboration, we can create a more inclusive and equitable environment where Black entrepreneurs thrive. It is through proactive measures, collective effort, and ongoing dialogue that we can dismantle systemic inequities and build a future where Black-owned businesses have equal access to the resources and support necessary for success.
Crude oil began trading this week with a gain after President Biden and House Speaker Kevin McCarthy were reported to have reached a provisional agreement on raising the debt ceiling.
At the time of writing, Brent crude was trading at over $77 per barrel and West Texas Intermediate was changing hands at over $73 per barrel.
Debt ceiling negotiations have been a major factor for oil price movements in the past couple of weeks, mostly because of the apparent inability of Republicans and Democrats in Congress to strike any semblance of an agreement on how to increase the federal government’s borrowing power.
According to early reports on the tentative deal, it involves flat spending over the next two years and the recycling of unused Covid funds.
Although such tense negotiations have been relatively regular in past years, they have eventually ended with an agreement, and default has invariably been avoided.
This historical evidence could have served to stabilize prices but it did not, and neither did mixed data about China’s recovery. On the one hand, PMI readings are showing an uneven rebound in economic activity, but on the other, demand for oil as evidenced by import rates, is going strong.
To complicate the picture further, OPEC+ is reportedly in two minds about what to do with its output at its next meeting.
According to reports quoting Saudi Energy Minister Abdulaziz bin Salman, he has hinted at another round of output cuts.
According to reports quoting Russia’s Deputy Prime Minister and top OPEC+ official Alexander Novak, the co-leader of the extended cartel is fine with production where it is right now.
Thanks to its recent gains, oil’s decline since the start of the year has shrunk from about 14% earlier this month to just 9% as of the start of this week, according to Bloomberg.
By Irina Slav for Oilprice.com
Irina Slav
Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.
American equity futures posted modest gains amid cautious optimism the U.S. will avert a catastrophic default after the weekend’s tentative debt-ceiling deal. European stocks wavered in muted holiday-affected trading.
Contracts on the S&P 500 climbed about 0.2 per cent, while those on the Nasdaq 100 were up around 0.3 per cent, with trading set to end early for Memorial Day. The dollar, which has benefited from angst around the statutory borrowing limit, held Friday’s decline while Treasury futures were flat in the absence of cash trading.
The Stoxx Europe 600 index edged lower, with Spain’s benchmark underperforming after Prime Minister Pedro Sanchez called a surprise snap election following heavy losses for his party in regional and local elections Sunday. Volumes were about 60 per cent lower than usual as markets in the U.K. and some European countries remained closed for national holidays. SBB gained after the embattled Swedish landlord said it may look to sell the company. A gauge of Asia-Pacific equities rose, though Chinese shares slid closer to a bear market.
President Joe Biden and House Speaker Kevin McCarthy expressed confidence that their agreement to curtail spending and extend the borrowing limit will pass through Congress. But even assuming lawmakers seal the deal before the U.S. government runs out of cash in about a week, traders still have much to contend with — from the prospect of another interest-rate hike from the Federal Reserve to a likely deluge of bond issuance from the U.S. Treasury Department.
“The obvious positive interpretation is that a negative tail risk is close to being taken off the table,” said Dan Suzuki, deputy chief investment officer at Richard Bernstein Advisors. “With the distraction of the debt ceiling fading into the background, investors can now refocus their attention on the underlying fundamentals. One concern, though, is that the fundamental picture remains precarious.”
European bonds rose, with Germany’s 10-year yield falling about 11 basis points. Spain’s 10-year yield dropped by a similar amount.
Meanwhile, Turkey’s lira weakened after Recep Tayyip Erdogan won a presidential runoff election on Sunday, extending his time as the nation’s longest-serving leader and leaving investors looking for any signs he’ll start to relax the state’s tight grip over markets. The nation’s stocks benchmark gained.
Gold was flat on waning demand for havens, while as oil held onto most of Friday’s gains and Bitcoin climbed, reflecting a modestly buoyant tone.
‘UNCERTAINTY PERSISTS
The agreement struck by Biden and McCarthy is running against the clock given that June 5 is the date when Treasury Secretary Janet Yellen has said cash will run out. There is plenty in the deal that Democrats and Republicans won’t like.
“Uncertainty persists regarding the duration and severity of the ongoing earnings recession, and perversely, the near-term tightening of liquidity may worsen due to the government’s need to address its debt issuance backlog,” said Suzuki. “While the markets managed to avert an immediate crisis, the coast is far from all-clear just yet.”
The rate-sensitive two-year Treasury drifted Friday as traders considered how a debt agreement could play into the Fed’s path forward on interest rates. The two-year yield hovered around 4.65 per cent after a report on consumer spending showed the Fed still has more work to do to bring inflation back toward its target.
“Markets will have the liquidity hassles to deal with, as the Treasury will issue a deluge of bonds to restore its cash reserves,” said Charu Chanana, market strategist at Saxo Capital Markets. “Not to forget, the hawkish re-pricing of the Fed path that we have seen last week could possibly get firmer if we get a hot jobs print this week.”
Key events this week:
U.S. Memorial Day holiday. U.K., Switzerland and some Nordic markets also closed for holidays, Monday
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