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Before the Bell: Stocks set to pause after Trump relief rally

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.

Exhausted stock markets are dri‎fting back downward to finish the week. Banks and government offices are closed in Canada for Remembrance Day and in the U.S. for Veterans Day. Because of this, trading appears to be more subdued overall, but some interesting trends are still emerging.

U.S. index futures are sliding in what looks like profit taking after the huge relief rally and Trump realignment seen this week. ‎Nasdaq futures are down 1.0 per cent, S&P futures are down 0.5 per cent and Dow futures are down 0.3 per cent. This continues a trend of Nasdaq underperformance that emerged Thursday related to two factors. Capital has been moving back into old economy sectors related to infrastructure, fossil fuels and manufacturing which stand to attract increased support under a Trump administration. While the new U.S. government may not be outright hostile to new economy sectors, they may not receive as much support (alternative energy) or could be impacted from a shift away from globalization (information technology). Traders appear to be funding these moves into old economy areas by taking profits out of high value technology and momentum plays.

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The other big realignment that continues to play out is a big shift in favour toward the U.K. and against continental Europe. Since the U.S. election, the pound has soared while the euro has crashed. Because of this the outperformance of the FTSE relative to the Dax continues to unwind with the FTSE down 1.2 per cent and the Dax up 0.3 per cent. The forces that aligned to elect Donald Trump are the same as those who backed Brexit. This week's U.S. vote confirmed that Brexit was not an isolated incident, it was the start of the political pendulum starting to swing in a different direction. Britain is no longer as isolated in its thinking, and could find a like-minded ally in the U.S. Meanwhile, moribund Europe looks increasingly at risk of being left in the dust and vulnerable to political shocks and risks of its own with Italy's referendum news the EU's next big political test.

In other market action today, crude oil is down 1.4 per cent as it sinks deeper into the lower half of a $40 to $50 trading range. This has already dragged on the Canadian dollar and could weigh on energy stocks. On Friday, OPEC reported an increase in its oil production in October to a record high led by members hoping to be exempt from the producer group's attempt to curb supply, pointing to an even larger global surplus next year. The Organization of the Petroleum Exporting Countries pumped 33.64 million barrels per day (bpd) last month, according to figures OPEC collects from secondary sources, up 240,000 bpd from September, OPEC said in a monthly report. The OPEC figures point to a bigger surplus than those of the International Energy Agency and underline OPEC's challenge in seeking to restrain supplies. Oil has fallen below $46 a barrel from a 2016 high near $54 reached soon after OPEC's deal was announced in September.

Bond markets are closed today but generally speaking, prices are falling and yields rising as traders increasingly expect interest rates to rise. Yesterday three Fed speakers, including ultra-dove James Bullard, president of the Federal Reserve Bank of St. Louis, indicated a rate hike is likely coming in December. In general, with fiscal support coming to the U.S., which is expected to boost employment and inflation (see the massive copper rally) the pressure on the Fed to do all the heavy lifting ‎is fading and interest rates appear likely to rise in the coming years. The big monetary stimulus cycle appears to be coming to an end.

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 9:00 a.m. ET)

Dow -0.17 per cent; S&P 500 -0.37 per cent; Nasdaq: -0.66 per cent; TSX 60 -0.38 per cent

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Equities
Japan's Nikkei +0.18 per cent
Shanghai composite index +0.78 per cent
Hong Kong's Hang Seng -1.35 per cent 
Germany's DAX +0.47 per cent
London's FTSE -1.20 per cent
France's CAC 40 -0.50 per cent

Commodities
WTI crude oil (Nymex Dec.) -1.28 per cent at $44.09 (U.S.) a barrel
Gold (Comex Dec.) -0.64 per cent at $1,258.30 (U.S.) an ounce
Copper (Comex Dec.) +5.10 per cent at $2.68 (U.S.) a pound

Currencies
Canadian dollar -0.26 at 73.94 cents (U.S.)
U.S. dollar index +0.02 at 98.81

Bonds
Canada 10-year bond yield +0.000 at 1.42 per cent (bond markets are closed for Remembrance Day)

KEY ECONOMIC RELEASES

Japan PPI and tertiary industry index
Germany CPI

(10 a.m. ET) U.S. University of Michigan Consumer Sentiment for November (P). Consensus is 87.5, down from 87.2 in previous month.
(10:50 a.m. ET) Bank of Canada governor Stephen Poloz participates on a panel in Santiago at the Banco Central de Chile
(1 p.m. ET) Baker-Hughes rig count.

Also: Bond markets in Canada and U.S. closed for Remembrance Day and Veterans Day, respectively.

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KEY STOCKS TO WATCH

Also see: Friday's small-cap stocks to watch

Shares of Nvidia jumped 12.6 percent after the graphic chipmaker reported its biggest quarterly revenue growth in more than six years, announced a buyback and hiked its dividend by 22 per cent.

**

CIBC cut CAE Inc. to "sector performer" from "sector outperformer."

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CIBC cut Gluskin Sheff + Associates' target price to $19 from $20.

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National Bank Financial upped Theratechnologies  to "outperform" from "sector perform."

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J.C. Penney's adjusted quarterly loss of 21 cents per share matched estimates, but revenue was below forecasts and comparable-store sales fell 0.8 per cent. Analysts surveyed by Thomson Reuters had expected a same-store sales increase of 2.2 per cent. Its shares fell 8 per cent in premarket trading.

**

Walt Disney missed estimates by six cents a share, with adjusted quarterly profit of $1.10 per share. Revenue also missed forecasts. Initially it's stock fell in premarket trading but recovered after its executives promised earnings growth for the next two years. Its shares gained 2.1  per cent in premarket trading.

**

Nordstrom reported adjusted quarterly profit of 84 cents per share, well above estimates of 52 cents a share. The retailer's revenue beat Street forecasts. But the company cut its profit forecast for 2016 while projecting flat comparable-store sales. Its shares rose 3.8 per cent in premarket trading.

**

Michael Kors came in seven cents a share above estimates, with quarterly profit of 95 cents per share. Its shares fell 6.3 per cent in premarket trading.

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Dan Loeb's Third Point hedge fund took new stakes in Apple, Alibaba, Visa, among others, and increased its holdings in Alphabet and Facebook, according to a quarterly filing.

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Amazon.com was ordered by a judge to refund parents for in-app purchases made by children without permission. However, the judge also turned aside a request by the Federal Trade Commission for a $26.5-million lump sum payout.

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CME Group CEO Phupinder Gill is stepping down on Dec. 31. Executive chairman and president Terry Duffy will add the CEO role to his duties.

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Valeant Pharmaceuticals may change its name to repair damage to its reputation, according to investor Bill Ackman in a CNBC interview. Ackman is a Valeant board member and his Pershing Square Capital Management is a major stakeholder.

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Waste Management named CFO James Fish as its new president and chief executive officer, succeeding David Steiner who had been CEO since 2004.

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Quest Diagnostics raised its revenue growth outlook and announced a 12.5 percent quarterly dividend increase.

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Credit Suisse upgraded Aetna and Humana to "outperform" from "neutral," on the idea that a Trump administration might improve prospects for health care stocks.

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Deckers Outdoor was upgraded to "buy" from "hold" at Stifel.

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Cowen upgraded Tiffany to "outperform" from "market perform," noting a comeback for the luxury category.

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Earnings include: Allianz SE; Aurinia Pharmaceuticals Inc.; Cascades Inc.; Cipher Pharmaceuticals Inc.; Clearwater Seafoods Inc.; Dynacor Gold Mines Inc.; Genesis Land Development Corp.; Intertape Polymer Group Inc.; J C Penney Company Inc.; K-Bro Linen Inc.; MAG Silver Corp.; NGex Resources Inc.; Orbite Technologies Inc.; Power Corporation of Canada; Power Financial Corp.

With files from wire services, CNBC.com, MarketWatch.com

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