Stocks may take a pause today from the recent rally that has left major U.S. indexes close to all-time highs. Markets overnight were mixed, and Dow Jones industrial average futures this morning indicate the index may open just shy of 14,000 after closing above that level on Friday for the first time in more than five years.
The resources-heavy S&P/TSX composite index will also have the added headwind of commodity prices that are lower almost across the board this morning.
Lingering concerns over the European debt crisis and the upcoming budget negotiations in the U.S. are keeping traders cautious. But perhaps more importantly, there are an increasing number of voices that suggest the market is in need of a short-term correction after a 6.1 per cent jump in the S&P 500 year-to-date left it in overbought territory. It was that index's best January since 1994, but the economic backdrop globally is still on the sluggish side, highlighted last week by the contraction in fourth-quarter U.S. GDP.
Corporate earnings have been helping fuel the rally. So far, about 70 per cent of companies have beat analysts' expectations on profit and - in a big pick up from the third quarter - about 67 per cent have surpassed sales projections. Guidance released for the first quarter of this year, however, suggests only modest growth in profits for the start of 2013.
Overnight, European markets edged lower. Bond yields in Spain edged up as Prime Minister Mariano Rajoy found himself in the middle of a potential corruption scandal, denying allegations over the weekend that he and some members of his political party had accepted secret payouts. Market players were also concerned about how a general election will play out later this month in Italy. There are concerns the next government could ease back on the economic reforms implemented by Prime Minister Mario Monti.
In economic news overnight, a non-manufacturing index in China rose to 56.2 from 56.1 in January, an indication that the country's services sector is continuing to pick up speed.
Now, here's a look at what else is going on this morning:
U.S. futures: S&P 500 -0.5 per cent; Dow -0.5 per cent at 13,888; Nasdaq -0.6 per cent
Hong Kong's Hang Seng index -0.16 per cent
Shanghai composite index +0.37 per cent
Japan's Nikkei +0.61 per cent
London's FTSE 100 -1.17 per cent
Germany's DAX -1.51 per cent
France's CAC 40 -1.58 per cent
WTI (Nymex Mar) -1.31 per cent at $96.33 (U.S.) a barrel
Gold (Comex Apr) -0.41 per cent at $1,663.60 (U.S.) an ounce
Copper (Comex Mar) -0.46 per cent at $3.77 (U.S.) a pound
Canadian dollar up 0.0013, or 0.13 per cent, at $1.0039 (U.S.)
ECONOMIC INDICATORS TO WATCH:
(10 a.m. ET) The U.S. Commerce Department reports on factory orders in December. Economists expect an increase of 2.2 per cent.
STOCKS TO WATCH:
Herbalife Ltd. shares are down 11 per cent in the premarket after the New York Post today reported that the Federal Trade Commission may be conducting a probe into the operations of the company, which has been heavily sold short by hedge fund manager Bill Ackman.
Dell Inc. shares are up nearly 1 per cent in the premarket amid reports that talks continued over the weekend that could end up taking the computer marker private.
Research In Motion Ltd. shares are about 5 per cent higher in the premarket. Today is the first day its ticker will be BBRY in the U.S. and BB in Toronto. Bernstein upgraded the stock today to "outperform" from "market perform" and raised its price target to $22 from $12, according to several reports this morning.
Earnings today include: Anadarko Petroleum Corp.; Anglo American Platinum Ltd.; Gannett Co. Inc.; Harmony Gold Mining Co. Ltd.; Petroleo Brasileiro SA; Yum Brands Inc.
THIS MORNING'S TOP INVESTING READS ON THE WEB:
Why stocks still beat bonds over the long haul: An interesting chart showing returns of bonds and major stock markets over the past one to five years.
No-money-down mortgages are back in the United States.
Four reasons why Apple's stock won't see $700 again.
The founder of the Vanguard Group thinks stocks will return 100 per cent in a decade.
A Bank of America strategist says equity fund flow signals are pointing to a correction, or a decent-sized sell-off.
Dan Fuss, whose Loomis Sayles Bond Fund beat 98 per cent of its peers in the last three years, said the fixed-income market is more "overbought" than at any time in his 55-year career
The premarket report is constantly updated to reflect the latest news developments and market moves. For instant headlines on breaking economic and corporate news in the premarket, follow Darcy Keith on Twitter at @eyeonequities