Wed, April 24, 2024 at 9:35 AM EDT
Business
What every Canadian investor needs to know today
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Equities
Key indexes in Canada and the United States opened higher Wednesday after a fresh reading on U.S. inflation helped ease at least some concerns about the future course of interest rates.
At 9:36 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was up 35.45 points, or 0.17%, at 20,621.18.
In the U.S., the Dow Jones Industrial Average rose 145.39 points, or 0.43 per cent, at the open to 33,707.20.
The S&P 500 opened higher by 24.57 points, or 0.60 per cent, at 4,143.74, while the Nasdaq Composite gained 107.11 points, or 0.88 per cent, to 12,286.66 at the opening bell.
Markets were playing close attention to the release of April U.S. inflation numbers, released before the start of trading.
The report showed the annual rate of inflation in the U.S. economy eased to 4.9 per cent last month, lower than the 5 per cent analysts had been forecasting. On a monthly basis, the consumer price index rose 0.4 per cent in April. That number was in line with forecasts but up from the 0.1-per-cent increase seen the month before. Excluding food and energy, the annual rate of inflation in April was 5.5 per cent. That also matched market forecasts.
The report was highly anticipated by traders, who are looking for clues about the course of rate moves by the Federal Reserve in the months ahead.
The Fed’s next policy decision is June 14, meaning markets will also get the May inflation report before that announcement. At its last meeting, the Fed hiked rates by a quarter percentage point but also signalled a likely move to the sidelines for the time being.
After the release of the April numbers, futures tied to the Fed’s policy rate had priced in a 90-per-cent chance that rates would remain unchanged at the central bank’s June meeting, according to Reuters.
“Today’s data was in line with expectations and does not change our view that the Fed has now paused its interest rate hikes, but the still hot pace in core inflation also reaffirms that rate cuts are not in the cards for this year,” CIBC economist Karyne Charbonneau said.
Canada’s reading on inflation is due next week.
In Canada, earnings season continues. Insurer Manulife Financial reports after the close of trading, as does RioCan REIT. Brookfield Asset Management and WSP both report this morning.
After Tuesday’s closing bell, Great-West Lifeco reported first-quarter net earnings of $595-million, down more than 55 per cent from $1.3-billion a year earlier, The Canadian Press reported. The Winnipeg-based insurer says base earnings for the quarter ended March 31 were $808-million, up more than 13 per cent from $712-million the same quarter a year ago. Diluted earnings per share were 64 cents, down from $1.43 a year earlier.
On Wall Street, Walt Disney Co. results are due after the close.
Overseas, the pan-European STOXX 600 was up 0.04 per cent following the fresh reading on U.S. inflation after spending much of the early premarket period in the red. Britain’s FTSE 100 gained 0.11 per cent. Germany’s DAX advanced 0.04 per cent while France’s CAC 40 rose 0.06 per cent.
In Asia, Japan’s Nikkei closed down 0.41 per cent. Hong Kong’s Hang Seng lost 0.53 per cent, extending the previous day’s losses.
Commodities
Crude prices were lower, following a three-day streak of gains, after weekly U.S. inventory figures showed a surprise increase.
The day range on Brent was US$76.11 to US$77.39 in the early premarket period. The range on West Texas Intermediate was US$72.44 to US$73.64. Both benchmarks were down more than 1 per cent in the early premarket period.
Figures from the American Petroleum Institute released late Tuesday showed U.S. crude stocks rose by 3.6 million barrels in the week ended May 5. Gasoline stockpiles rose by nearly 400,000 barrels.
Analysts polled by Reuters had been forecasting a decline for both.
More official figures are due later Wednesday morning from the U.S. Energy Information Administration.
“Inventory data typically holds sway ahead of US driving season; hence the market focus will turn to the API and EIA crude stocks data this week, with oil traders still looking over their shoulders at U.S. inflation data and bank stocks,” Stephen Innes, managing partner with SPI Asset Management said.
In other commodities, gold prices slid after two days of gains.
Spot gold was down 0.3 per cent to US$2,028.06 per ounce by early Wednesday morning, while U.S. gold futures shed 0.4 per cent to US$2,034.40.
“Gold is entering a win-win scenario as a hot inflation report will justify higher rates for longer that will cripple growth prospects and trigger a stock market selloff,” OANDA senior analyst Ed Moya said in a note.
“A cooling round of inflation data points could vindicate calls that the Fed is done tightening and support Fed rate cuts to happen later in the year.”
Currencies
The Canadian dollar was slightly weaker in early trading as crude prices slid and risk sentiment remained tentative while its U.S. counterpart was steady against a basket of currencies.
The day range on the loonie was 74.63 US cents to 74.80 US cents in the predawn period. The loonie has gained 1.6 per cent over the last five days and is up more than 1 per cent for the year to date.
Against a basket of currencies, the U.S. dollar index steadied at 101.64 after wavering through the early morning period, according to figures from Reuters.
The U.S. dollar saw some pressure from news Tuesday that talks between U.S. President Joe Biden and top lawmakers led to little headway on raising the US$31.4-trillion debt limit. Further talks are scheduled for Friday.
Elsewhere, the euro was flat at US$1.0957 early Wednesday, as was Britain’s pound, which held at US$1.2628. The Bank of England is scheduled to deliver its next rate decision on Thursday. The central bank is expected to again hike borrowing costs.
In bonds, the yield on the U.S. 10-year note was lower at 3.509 per cent in the predawn period.
More company news
Vacation rental booking company Airbnb Inc said on Tuesday that it expected fewer bookings and lower average daily rates in the second quarter versus a year earlier. U.S. travel companies, which have benefited from higher prices and hybrid work, are moderating their outlook for 2023 as pre-pandemic travel patterns return and consumers seek cheaper accommodation amid high inflation and recession fears. Shares sank more than 11 per cent shortly after the opening bell. –Reuters
Tim Hortons says the coffee and doughnut chain has signed a deal to open locations in South Korea starting later this year. The company says it has signed a master franchise agreement with BKR Co. Ltd. Financial terms of the agreement were not immediately available. BKR is the company that operates Burger King, which is also owned by Tim Hortons parent company Restaurant Brands International Inc., in South Korea. Tim Hortons has about 5,600 restaurants across 15 countries. –The Canadian Press
Economic news
(8:30 a.m. ET) Canadian building permits for March.
(8:30 a.m. ET) U.S. CPI for April.
(2 p.m. ET) U.S. budget balance for April.
With Reuters and The Canadian Press
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Business
Oil Firms Doubtful Trans Mountain Pipeline Will Start Full Service by May 1st
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Oil companies planning to ship crude on the expanded Trans Mountain pipeline in Canada are concerned that the project may not begin full service on May 1 but they would be nevertheless obligated to pay tolls from that date.
In a letter to the Canada Energy Regulator (CER), Suncor Energy and other shippers including BP and Marathon Petroleum have expressed doubts that Trans Mountain will start full service on May 1, as previously communicated, Reuters reports.
Trans Mountain Corporation, the government-owned entity that completed the pipeline construction, told Reuters in an email that line fill on the expanded pipeline would be completed in early May.
After a series of delays, cost overruns, and legal challenges, the expanded Trans Mountain oil pipeline will open for business on May 1, the company said early this month.
“The Commencement Date for commercial operation of the expanded system will be May 1, 2024. Trans Mountain anticipates providing service for all contracted volumes in the month of May,” Trans Mountain Corporation said in early April.
The expanded pipeline will triple the capacity of the original pipeline to 890,000 barrels per day (bpd) from 300,000 bpd to carry crude from Alberta’s oil sands to British Columbia on the Pacific Coast.
The Federal Government of Canada bought the Trans Mountain Pipeline Expansion (TMX) from Kinder Morgan back in 2018, together with related pipeline and terminal assets. That cost the federal government $3.3 billion (C$4.5 billion) at the time. Since then, the costs for the expansion of the pipeline have quadrupled to nearly $23 billion (C$30.9 billion).
The expansion project has faced continuous delays over the years. In one of the latest roadblocks in December, the Canadian regulator denied a variance request from the project developer to move a small section of the pipeline due to challenging drilling conditions.
The company asked the regulator to reconsider its decision, and received on January 12 a conditional approval, avoiding what could have been another two-year delay to start-up.
Business
Tesla profits cut in half as demand falls
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Tesla profits slump by more than a half
Tesla has announced its profits fell sharply in the first three months of the year to $1.13bn (£910m), compared with $2.51bn in 2023.
It caps a difficult period for the electric vehicle (EV) maker, which – faced with falling sales – has announced thousands of job cuts.
Boss Elon Musk remains bullish about its prospects, telling investors the launch of new models would be brought forward.
Its share price has risen but analysts say it continues to face significant challenges, including from lower-cost rivals.
The company has suffered from falling demand and competition from cheaper Chinese imports which has led its stock price to collapse by 43% over 2024.
Figures for the first quarter of 2024 revealed revenues of $21.3bn, down on analysts’ predictions of just over $22bn.
But the decision by Tesla to bring forward the launch of new models from the second half of 2025 boosted its shares by nearly 12.5% in after-hours trading.
It did not reveal pricing details for the new vehicles.
However Mr Musk made clear he also grander ambitions, touting Tesla’s AI credentials and plans for self-driving vehicles – even going as far as to say considering it to be just a car company was the “wrong framework.”
“If somebody doesn’t believe Tesla is going to solve autonomy I think they should not be an investor,” he said.
Such sentiments have been questioned by analysts though, with Deutsche Bank saying driverless cars face “technological, regulatory and operational challenges.”
Some investors have called for the company to instead focus on releasing a lower price, mass-market EV.
However, Tesla has already been on a charm offensive, trying to win over new customers by dropping its prices in a series of markets in the face of falling sales.
It also said its situation was not unique.
“Global EV sales continue to be under pressure as many carmakers prioritize hybrids over EVs,” it said.
Despite plans to bring forward new models originally planned for next year the firm is cutting its workforce.
Tesla said it would lose 3,332 jobs in California and 2,688 positions in Texas, starting mid-June.
The cuts in Texas represent 12% of Tesla’s total workforce of almost 23,000 in the area where its gigafactory and headquarters are located.
However, Mr Musk sought to downplay the move.
“Tesla has now created over 30,000 manufacturing jobs in California!” he said in a post on his social media platform X, formerly Twitter, on Tuesday.
Another 285 jobs will be lost in New York.
Tesla’s total workforce stood at more than 140,000 late last year, up from around 100,000 at the end of 2021, according to the company’s filings with US regulators.
Musk’s salary
The car firm is also facing other issues, with a struggle over Mr Musk’s compensation still raging on.
On Wednesday, Tesla asked shareholders to vote for a proposal to accept Mr Musk’s compensation package – once valued at $56bn – which had been rejected by a Delaware judge.
The judge found Tesla’s directors had breached their fiduciary duty to the firm by awarding Mr Musk the pay-out.
Due to the fall in Tesla’s stock value, the compensation package is now estimated to be around $10bn less – but still greater than the GDP of many countries.
In addition, Tesla wants its shareholders to agree to the firm being moved from Delaware to Texas – which Mr Musk called for after the judge rejected his payday.
Business
Stock market today: Nasdaq futures pop, Tesla surges after earnings with more heavyweights on deck
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Tech stocks rose on Wednesday, outstripping the broader market as investors welcomed Tesla’s (TSLA) cheaper car pledge and waited for the next rush of corporate earnings.
The Nasdaq Composite (^IXIC) rose roughly 0.6%, coming off a sharp closing gain. The S&P 500 (^GSPC) was up 0.2%, continuing a rebound from its longest losing streak of 2024, while the Dow Jones Industrial Average (^DJI) fell 0.1%.
Tesla shares jumped nearly 12% after the EV maker’s vow to speed up the launch of more affordable models eclipsed its quarterly earnings and revenue miss. That cheered up investors worried about growth amid a strategy shift to robotaxis and the planned cancellation of a cheaper model.
The results from the first “Magnificent Seven” to report have intensified the already high hopes for Big Tech earnings, that the megacaps can revive the rally in stocks they powered. The spotlight is now on Meta’s (META) report due after the market close, as the Facebook owner’s shares rose after the Senate voted for a potential ban on rival TikTok. Microsoft (MSFT) and Alphabet (GOOG) next up on Thursday.
Meanwhile, Boeing (BA) reported better than expected first quarter results before the opening bell with a loss per share of $1.13, narrower than the $1.72 estimated by Wall Street. Shares rose about 2% in morning trade.
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