Equity Markets
Canada's main stock index rose shortly after the open with across-the-board gains led by financial stocks, while Hudson's Bay Co shares jumped after the company announced the sale of its Lord & Taylor flagship building and an investment deal.
The Toronto Stock Exchange's S&P/TSX composite index rose 45.78 points, or 0.29 per cent, to 15,901.54. All 10 of the index's key sectors advanced.
HBC was up 6.98 per cent to $12.57 in early trading after announcing a $1-billion deal to sell its flagship store in New York to WeWork Cos and team up with the office-sharing business to run its operations in parts of HBC's stores.
The Canadian dollar steadied against its U.S. counterpart on Tuesday as oil prices rose, with the currency holding near a two-month low touched earlier in the day as investors braced for a Bank of Canada interest rate decision on Wednesday.
At 8:54 a.m. EDT, the Canadian dollar was nearly unchanged at $1.2643 to the greenback, or 79.10 U.S. cents.
The currency's strongest level of the session was $1.2622, while it touched its weakest since Aug. 18 at $1.2668.
After back-to-back interest rate increases, the Bank of Canada can stay on the sidelines for longer than first anticipated, with tighter mortgage rules slowing the housing market and uncertainty about the North American Free Trade Agreement clouding the outlook for the economy.
Chances of a rate increase this week have sunk to about 25 per cent from nearly 50 per cent in mid-September, the overnight index swaps market indicates.
The central bank's policy rate sits at 1 per cent.
The Dow Jones opened at a record high on Tuesday, powered by a 6-per-cent surge in Caterpillar's shares.
The Dow Jones Industrial Average rose 130.25 points, or 0.56 per cent, to 23,404.21. The S&P 500 gained 4.96 points, or 0.19 per cent, to 2,569.94. The Nasdaq Composite added 11.99 points, or 0.18 per cent, to 6,598.82.
The world's largest construction and mining equipment maker beat third-quarter profit and sales estimates and raised its full-year forecast, putting its shares on course to open at a record high.
The other Dow components that reported upbeat results include 3M and United Technologies.
"The reaction to the earnings from the Dow components is in favor," said Randy Frederick, vice president of trading and derivatives for Charles Schwab in Austin, Texas.
"Chances are, with this strong an opening, it will likely remain positive."
Third-quarter earnings season has been largely positive, with three quarters of the 97 S&P 500 companies that have reported results as of Monday beating profit estimates.
Overseas, markets were drifting with analysts citing low volatility as the common theme. On Wall Street, key indexes all finished lower on Monday's session but analysts chalked that up mostly to profit taking after a series of record closes.
On Bay Street, Canadian National Railways reports its quarterly earnings after the close of markets. On average, analysts are expecting earnings per share of about $1.06, up from $1 in the year-earlier quarter. Last week, Canadian Pacific boosted its full-year profit outlook on strong growth in freight revenue.
Outside earnings, Finance Minister Bill Morneau delivers the federal government's fiscal update late this afternoon. On Wednesday, the Bank of Canada follows up with its next interest-rate announcement.
"Thanks to a smaller-than-expected deficit in fiscal year 2016/17 and stronger economic growth in the current calendar year, the government's finances are in better shape than it projected in Budget 2017," RBC assistant chief economist Paul Ferley said in a recent note. "That should put an end to the recent trend of ever-deeper deficit projections."
In fact, he said, Ottawa has scope to trim the projected deficit by $10-billion in the current fiscal yearand cut cumulative deficits by nearly "over the projection horizon."
"The big question is whether the government will choose to spend some, or all, of this fiscal dividend," he said. "We think it should exercise restraint."
Overseas, shares were edging higher after a weaker start to the session as economic reports out of Europe's biggest economies made the case for the European Central Bank to signal cuts to its massive stimulus program when it meets later in the week.
The pan-European STOXX 600 index was mostly flat in early going. London's FTSE 100 was down 0.03 per cent while Germany's DAX rose 0.10 per cent and France's CAC 40 rose 0.11 per cent.
New figures showed private sector growth across slowed more than expected this month, but remained strong as companies increased prices. IHS Markit's euro zone Flash Composite Purchasing Managers' Index for October, seen as a good guide to economic growth, fell to 55.9 from September's 56.7, still comfortably above the 50 level that separates growth from contraction, Reuters reported.
In Asia, Japan's Nikkei continued to set records with its 16th straight day of gains, finishing up 0.50 per cent. Hong Kong's Hang Seng was down about half a percentage point. The Shanghai composite index rose 0.22 per cent.
Commodities
Oil prices shifted higher in early going after spending much of the early morning period in the red. The day range on West Texas Intermediate is $51.55 (U.S.) a barrel to $52.37. Brent crude was also higher after falling close to the $57-a-barrel level early in the session.
Later Tuesday, the American Petroleum Institute releases its latest numbers on U.S. crude stocks. Reports suggest a decline in inventories is likely.
The figures will be followed by the U.S. government's own figures when the Energy Information Administration releases its weekly statistics on Wednesday.
Crude prices got some support Tuesday after Saudi Arabia it remained committed to rebalancing the market. The Saudi energy minister said the focus remained on reducing oil stocks in industrialised countries to their five-year average.
Also factoring into Tuesday's movement has been a report crude continues to flow through Iraq's northern pipeline to Ceyhan in Turkey.
Reuters, citing shipping sources, said pumping along the pipeline rose to 300,000 barrels per day on Tuesday, adding to Monday's gain. Output fell last week when Iraqi forces regained control of oilfields from Kurdish fighters.
"The increase is minimal and is way below the normal 600,000 bpd, nevertheless the market took it as a positive development as far as oil supply is concerned," said Tamas Varga of oil broker PVM, referring to the gain in flows on Monday.
In other commodities, gold was lower as investors continued to bide their time waiting for word on who will be the next chair of the Federal Reserve. U.S. President Donald Trump has said he is close to announcing the Fed's next leader. A hawkish candidate is seen as being favourable to higher interest rates, pushing up the U.S. dollar but putting pressure on gold prices.
Spot gold was lower early Tuesday but above the early October lower seen in the previous day's session. U.S. gold futures for December delivery were also lower.
Silver, meanwhile, was higher after hitting its weakest point since Oct. 9 a day earlier. London copper touched a one-week high.
Currencies and bonds
The Canadian dollar slid below 79 cents (U.S.) in early going as the markets await Wednesday's Bank of Canada interest-rate announcement. The markets have widely discarded any notion that rates will move higher this week after hikes in the two previous announcement. Attention now turns to how clearly the central bank signals its intentions for its late-year policy announcements.
The day range on the loonie so far is 78.94 cents (U.S.) to 79.22 cents.
"We are expecting the BoC to keep policy rates steady, but there remains a trace of doubt in the market's mind due to past surprises," Bank of Montreal economist Robert Kavcic said in a recent note. "...Since September's unexpected move, we've heard a markedly more cautious tone from policy makers."
He said BMO expects caution to be prevalent in the Bank of Canada's policy statement against a backdrop of slowing growth, uncertainty around NAFTA, further measures to cool the housing market and two rate hikes already on the books.
In other currencies, the U.S. dollar index, which measures the greenback against a basket of world currencies, was lower in early going after recent highs. Continued speculation about who will lead the Fed continues to weigh on the U.S. dollar.
The five likeliest candidates are said to include current chair Janet Yellen as well as Fed Governor Jerome Powell, Stanford University economist John Taylor, Trump's chief economic advisor Gary Cohn, and former Fed Governor Kevin Warsh. Ms. Yellen's current term expires in February.
Elsewhere, the New Zealand dollar was the biggest mover in a tame batch of G10 currencies, hitting its weakest level in five-months as the incoming Labour government begins to make its plans known. Among those is a plan to review and reform the central bank's mandate to possibly include employment along with inflation as a dual target. The New Zeland dollar is down about 5 per cent since last month's election, according to Reuters.
In bonds, the yield on the U.S. 10-year note was higher at 2.397 per cent. The yield on the 30-year note was also higher at 2.916 per cent.
Stocks set to see action
The Globe's Marina Strauss reports that Hudson's Bay Co. has a $1-billion deal to sell its Lord & Taylor flagship store in New York to WeWork Cos and team up with the office-sharing business to run its operations in parts of HBC's stores. Toronto-based HBC, which is under pressure from an activist shareholder to monetize its real estate, said Tuesday Rhone Capital, an investor in WeWork, is making a $632-million equity investment in HBC, which also owns its namesake stores and Saks Fifth Avenue. The retailer expects to continue to run the Lord & Taylor store on Fifth Avenue in a shrunken space in that building after WeWork converts it into its New York headquarters as well as shared office space to lease to other businesses or individuals.
McDonald's Corp reported better-than-expected quarterly sales at established U.S. restaurants on Tuesday, as it attracted more customers with its $1 and $2 beverages and premium customizable sandwiches such as Sriracha artisan chicken. Sales at U.S. restaurants open at least 13 months rose 4.1 percent, above the 3.4 per cent growth expected on average by analysts polled by research firm Consensus Metrix. Net income rose to $1.88-billion, or $2.32 per share, in the third quarter ended Sept. 30, from $1.28-billion, or $1.50 per share, a year earlier.
General Motors Co posted a stronger than expected pre-tax profit for the third quarter before related to the sale of its European operations, and shares jumped as GM reaffirmed its full-year earnings outlook and a promise to slash stocks of unsold vehicles. The results sent the company's shares up 4 per cent in pre-market trading. GM said it expects U.S. vehicle sales to remain stable at an annual pace of about 17 million light vehicles in 2017, "and we expect that in 2018 as well," GM Chief Financial Officer Chuck Stevens told reporters on Tuesday.
Caterpillar Inc. shares rose 6.8 per cent in premarket trading after the equipment giant posted a 25-per-cent jump in quarterly revenue, driven by soaring demand for its construction equipment. The company also raised its 2017 revenue forecast for a third time this year. Profit attributable to common stockholders rose to $1.06-billion, or $1.77 per share, in the third quarter ended Sept. 30, from $283-million, or 48 cents per share, a year earlier. Excluding restructuring costs, Caterpillar earned $1.95 per share, compared with 85 cents per share, a year earlier.
Eli Lilly and Co., one of the world's top insulin-makers, on Tuesday reported a better than expected third-quarter profit, and said it was reviewing options, including a sale or an IPO, for its Elanco Animal Health business. The drug maker, whose animal health business brought in $740.6-million in the latest quarter, said it would provide an update on its plans for Elanco no later than the middle of 2018. Lilly also said it was exploring strategic options, including a sale, of Posilac, a supplement to boost dairy cow productivity that it acquired from Monsanto Co in 2008. The Indianoplis-based company said its net income fell to $555.6-million, or 53 cents per share, in the quarter ended Sep. 30, from $778-million, or 73 cents per share, a year earlier. It shares were up 2 per cent in premarket trading.
Suncor Energy has applied to the Alberta Energy Regulator for approval of its Meadow Creek West project. According to the AER, the project would recover 6,359 cubic metres per day (40 000 barrels per day) from the McMurray Formation using steam-assisted gravity drainage technology. The project would include a central processing facility with associated facilities, cogeneration facilities, thermal injection wells, production wells, water source wells, disposal wells, well pads, stormwater ponds and associated infrastructure.
Bombardier Inc. and Boeing Co. were closing in on a deal this summer brokered by Canadian government officials before the American plane maker abruptly pulled the plug and walked away, people familiar with the matter say. The negotiations were designed to prevent an aerospace trade battle between Canada and the United States and could have seen Boeing take an ownership stake in Bombardier's C Series aircraft. Instead, after the talks broke off, the United States imposed huge import duties on the planes and Bombardier struck a trans-Atlantic agreement with Europe's Airbus SE in a deal that will change the face of the global aerospace industry and leaves Boeing poised to seek retribution, according to a report in The Globe and Mail.
3M Co. reported third-quarter profit of $1.43-billion or $2.33 per share. The results surpassed Wall Street expectations. The average estimate of eight analysts surveyed by Zacks Investment Research was for earnings of $2.21 per share. The maker of Post-it notes, industrial coatings and ceramics posted revenue of $8.17-billion in the period, also beating Street forecasts or $7.91-billion. 3M expects full-year earnings to be $9 to $9.10 per share. Its shares rose 2.9 per cent in premarket trading.
United Technologies gained 1 per cent in premarket trading after the company reported a better-than-expected profit and raised earnings forecast for the second time this year.
Apple slipped 0.7 per cent after report that the company would settle for half its planned iPhone X shipments this year, but then the stock recovered to be up 0.05 per cent.
Whirlpool tumbled more than 9 per cent after the home appliances maker reported profit and sales below estimates and lowered full-year earnings guidance.
Stanley Black & Decker earned an adjusted $1.95 per share in the third quarter, which was eight cents above forecasts. Revenue also beat estimates. Its shares rose 3.8 per cent in premarket trading.
Swiss drugmaker Novartis is moving closer to spinning off the ailing Alcon eyecare business it bought from Nestle for $50 billion in 2010, but said on Tuesday a final decision would depend on the unit's continued sales growth. A 7 percent rise in Alcon sales in the third quarter pushed Novartis's overall revenue up 2 percent to $12.4 billion, the company said, beating the $12.2 billion average in a Reuters poll of analysts. Its shares slid 2.3 per cent in premarket trading.
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(9:45 a.m. ET) U.S. flash Composite Purchasing Managers' Index (PMI) for October is announced.
With files from Reuters and Bloomberg