Colin Cieszynski
The Before the Bell report is compiled by editors of The Globe and Mail and is updated throughout the morning to reflect latest developments. Colin Cieszynski, Chartered Financial Analyst and Chartered Market Technician, is chief market strategist with CMC Markets.
With yesterday's big correcting move winding down and overextended conditions easing, realigned markets have paused to await the results of today's big U.S. Presidential Election. U.S. index futures, the FTSE, the Dax, gold and crude oil are all trading within 0.2 per cent of flat.
It has been a long, bitter campaign between two very different viewpoints on how America needs to go forward. Recent polls have Democratic candidate Hillary Clinton with a slight lead but within the margin of error and losing momentum to Republican candidate Donald Trump. This feels a lot like the Brexit campaign last spring. It has turned out to be a lot closer than many would have expected and the potential for an upset Trump win is very real.
Last night, I was watching coverage of some of the last campaign events. Hillary Clinton was in Pennsylvania, a state she should have locked up months ago. To get a enough people in the crowd to show on TV, she needed both Barack and Michelle Obama, Bruce Springsteen and Bon Jovi to generate interest. Meanwhile, Trump has been on offence, campaigning in what have been rock solid Democratic states like Michigan. It feels like a realignment is coming. Either side could come out on top but the tide has been turning toward Trump lately.
Monday's market action showed the Street is still favouring stability over change with many traders speculating on a Clinton win. If she does win, stocks could stage another rally, gold could sell off and the Mexican Peso would likely soar. Stocks may only get so far, however as the U.S. dollar would also likely rally with a Clinton win setting the stage for a Fed rate hike in December.
If Donald Trump wins, uncertainty over what he may do would likely spark a rally in gold and a plunge in the Mexican Peso. As with Brexit, stocks could fall initially but then bounce later this week as the greenback would likely also fall with traders speculating Trump-related volatility could take a December rate hike off the table (it would only be a postponement though as Trump has criticized the Fed for keeping rates low).
There is also a small chance of a tie or a contested election that leads to recounts, like the Florida fiasco of 2000 which took weeks and a Supreme Court decision to sort out. That situation would also create uncertainty with markets reacting similar to a Trump win. Because the winner could go back and forth for a while, a contested result could spark more volatility for longer. In November of 2000 for example, the Dow fell over 5 per cent while the election was being contested.
The markets feel like a coiled spring ready to move significantly with the direction depending on who wins the election. This brings risks but also opportunities. It's not the time to be complacent, it's time to be prepared for whatever happens.
Now, here is a closer look at what's going on this morning and what is still to come.
MARKET DATA:
Futures (as of about 8:30 a.m. ET)
Dow -0108 per cent; S&P 500 -0.18 per cent; Nasdaq: -0.15 per cent; TSX 60 -0.10 per cent
Equities
Japan's Nikkei -0.03 per cent
Shanghai composite index +0.47 per cent
Hong Kong's Hang Seng +0.47 per cent
Germany's DAX -0.11 per cent
London's FTSE -0.02 per cent
France's CAC 40 -0.12 per cent
Commodities
WTI crude oil (Nymex Dec.) -0.51 per cent at $44.66 (U.S.) a barrel
Gold (Comex Dec.) +0.13 per cent at $1,281.10 (U.S.) an ounce
Copper (Comex Dec.) -0.58 per cent at $2.30 (U.S.) a pound
Currencies
Canadian dollar +0.03 at 74.80 cents (U.S.)
U.S. dollar index +0.04 at 97.82
Bonds
Canada 10-year bond yield -1.24 at 1.20 per cent
KEY ECONOMIC RELEASES
Japan leading index
Germany industrial production and trade surplus
(8:15 a.m. ET) Canada housing starts for October. Consensus is an annualized rate decline of 11.1 per cent.
Canadian housing starts slowed in October as condo construction pulled back after a surge in September, data from the national housing agency showed on Tuesday. The seasonally adjusted annualized rate of housing starts fell to 192,928 units in October, roughly in line with expectations, from a revised 219,363 rate in September. Multiple urban starts -- typically condos and apartments -- fell 15.3 percent to 115,402 units, while single-detached urban starts notched a milder 5.4 percent decline to 60,729 units.
(8:30 a.m. ET) Canada building permits for September. Estimate is a decline of 3.0 per cent from August.
The value of Canadian building permits fell by 7 percent in September from August, making for the biggest drop in eight months, data from Statistics Canada showed on Tuesday. The drop was attributed to lower construction intentions for non-residential buildings, especially in retail complexes and office building plans. The total value of residential building permits rose 2.6 percent in September on construction intentions for multi-family dwellings. The non-residential sector fell 22.3 percent, led by a drop in the commercial component.
(10 a.m. ET) U.S. Job Openings & Labor Turnover Survey for September.
(11:05 a.m. ET) Bank of Canada deputy governor Lawrence Schembri speaks in Halifax at the Atlantic Institute for Market Studies.
(12 p.m. ET) Canada – Ontario fiscal update
Also: U.S. election
KEY STOCKS TO WATCH
See also:Tuesday's small cap stocks to watch
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Valeant Pharmaceuticals is reporting a third-quarter loss of $1.22-billion (U.S.), mainly tied to a writedown of Salix – a company acquired last year. The Montreal-based pharmaceutical company says the net loss was equal to $3.49 per share, which contrasted to a profit of $49.5-million or 14 cents per share in the third-quarter of 2015. Valeant's U.S.-listed shares fell as much as 10 per cent in premarket trading Tuesday.
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Hertz slumped 33.3 percent to $23.84 in premarket trading after the car rental company slashed its full-year profit forecast.
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Priceline rose 4.8 percent in premarket trading after the travel website operator reported quarterly profit and revenue that beat analysts' estimates.
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Tesla announced a deal to buy German engineering firm Grohmann for an undisclosed amount, in a move the automaker said would further its push into high-volume manufacturing. Its shares were up 0.09 per cent in premarket trading.
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Drugstore operator CVS Health earned an adjusted $1.64 per share for its latest quarter, seven cents a share above estimates. The company's revenue fell short of estimates, and it cut its full-year forecast. Its shares fell 16.2 per cent in premarket trading.
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Homebuilder DR Horton fell two cents a share short of estimates, with quarterly earnings of 75 cents per share. Revenue also came in slightly below forecasts. Its results were impacted by a jump in cancellations. DR Horton also announced a 25-per-cent quarterly dividend increase to 10 cents per share. Its shares fell 4.7 per cent in premarket trading.
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Online home furnishings retailer Wayfair lost 54 cents per share for its latest quarter, smaller than the 60 cent loss that analysts were expecting. Revenue came in above forecasts. Its shares fell 13.7 per cent in premarket trading.
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Xerox's board approved the terms of its upcoming split into two separate companies, and expects to complete the split by December 31. Xerox shareholders will get one share of the new company known as Conduent for every five Xerox shares they now hold.
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Citi downgraded Goldman Sachs to "neutral" from "buy," in a call based on valuation relative to earnings expectations. Its shares fell 0.7 per cent in premarket trading.
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Deutsche Bank downgraded Bank of America to "hold" from "buy," noting the strong performance of the stock from 2016 lows and what it sees as modest additional upside potential. Its shares fell 0.9 per cent in premarket trading.
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Beer brewer Anheuser-Busch InBev has gotten at least six bids for brands that it is selling, according to Reuters. Among the reported bidders: Japan's Asahi Group, and private-equity firms Bain Capital and Kohlberg Kravis Roberts. Its shares were up 1.0 per cent in premarket trading.
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SeaWorld posted quarterly profit of 77 cents per share, well short of the $1.08 a share expected by analysts. Its shares fell 3.9 per cent in premarket trading.
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Evercore cut its rating on Best Buy to "sell," based on valuation as well as a saturated smartphone market and a shift in high end TVs toward discounters and online sellers. Its shares fell 2.8 per cent in premarket trading.
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Priceline reported adjusted quarterly profit of $31.18 per share, beating estimates of $29.91 a share. Its revenue beat forecasts, but its current-quarter guidance falls below consensus estimates. It also announced a $941 million write-down related to its OpenTable service. Its shares rose 4.3 per cent in premarket trading.
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News Corp. lost an adjusted one cent per share for its latest quarter, slightly worse than the breakeven quarter analysts had expected. Its shares rose 0.3 per cent in premarket trading.
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AutoCanada Inc.: CIBC cuts to sector "underperformer" from "sector performer."
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Teck Resources Ltd.: Citigroup starts with "neutral" and target price $30 (Canadian).
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Detour Gold Corp.: RBC cuts to "sector perform" from "outperform."
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Earnings include: Aimia Inc.; Alaris Royalty Corp.; Alterra Power Corp.; Bird Construction Inc.; Black Diamond Group Ltd.; Calian Group Ltd.; Canacol Energy Ltd.; Canadian Solar Inc.; Catalyst Paper Corp.; Cathedral Energy Services Ltd.; Cervus Equipment Corp.; Cineplex Inc.; Concho Resources Inc.; CVS Health Corp.; D.R. Horton Inc.; Dundee Precious Metals Inc.; E L Financial Corporation Ltd.; EcoSynthetix Inc.; Ensign Energy Services Inc.; Freehold Royalties Ltd.; Gear Energy Ltd.; Great Canadian Gaming Corp.; Hardwoods Distribution Inc.; Hydrogenics Corp.; Kelso Technologies Inc.; Kelt Exploration Ltd.; Keyera Corp.; Lucara Diamond Corp.; Melcor Developments Ltd.; Morneau Shepell Inc.; Nuvo Pharmaceuticals Inc.; Painted Pony Petroleum Ltd.; Perpetual Energy Inc.; Polaris Materials Corp.; Pure Technologies Ltd.; Rocky Mountain Dealerships Inc.; Russel Metals Inc.; Savanna Energy Services Corp.; Spin Master Corp.; Tamarack Valley Energy Ltd.; TORC Oil & Gas Ltd.; U.S. Foods Holding Corp.; Valeant Pharmaceuticals International Inc.; WSP Global Inc.
With files from wire services, cnbc.com