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Before the bell: Stocks weak as correction fears deepen

The Before the Bell report is constantly updated to reflect the latest news developments and market moves in the premarket. Check back later for updates.

Markets are looking a little vulnerable this morning, as Thursday's pullback in stocks has created unease over whether the long-awaited correction is finally nearing. Stock futures are nearly flat after trading earlier this morning in negative territory.

While the major U.S. and Canadian indexes are still close to record or multi-year highs, the bigger picture isn't nearly as rosy. U.S. small cap stocks as a whole are down more than 10 per cent from their recent highs, marking what could already be called a correction in that market segment. And investors are taking an unanticipated liking to U.S. treasuries, a sign they are seeking safety and are far from worried about the inflationary pressures that come from an economy that is heating up. The yield on the U.S. 10-year government bond this morning is near a seven-month low.

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Markets still have a lot of fundamental support, including a better-than-expected quarterly earnings season that just wrapped up and a U.S. labour market clearly on the mend. Many believe stocks will continue to see largely sideways trading action for some time, but that could very well be accompanied by a short-term dip.

The U.S. released stronger-than-expected housing starts and building permits data for April this morning, helping to support the theory that weakness in the sector earlier this year was due to inclement weather.

Meanwhile, Ukraine remains a concern and there are signs that more political-inspired clashes may be nearing. Bloomberg News is reporting today that Ukrainian troops have moved to force separatists from their eastern rebel bases near two towns. That's helping to keep European indexes in the red this morning.

Trading in Asia overnight was highlighted by a 1.4 per cent drop in the Japanese Nikkei, owing to strength in the yen, and India's main stock index jumped to record highs in anticipation of a new, more market-friendly, government in elections there.

Now, here's a closer look at what's going on this morning and what is still to come.

MARKETS:

Equities:

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Futures: S&P 500 +0.08 per cent; Dow +0.02 per cent; Nasdaq +0.10 per cent; S&P Toronto -0.13 per cent

Hong Kong's Hang Seng -0.08 per cent

Shanghai composite index +0.10 per cent

Japan's Nikkei -1.41 per cent

London's FTSE 100 -0.04 per cent

Germany's DAX -0.32 per cent

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France's CAC 40 +0.02 per cent

Commodities:

WTI crude oil (Nymex Jly) +0.11 per cent at $101.24 (U.S.) a barrel

Gold (Comex Jun) +0.02 per cent at $1,293.90 (U.S.) an ounce

Copper (Comex Jly) +0.24 per cent at $3.15 (U.S.) a pound

Currencies:

Canadian dollar at 91.91 cents (U.S.), down 0.0000

U.S. dollar index up 0.08 at 80.08

Bonds:

U.S. 10-year Treasury yield 2.50 per cent, up 0.006

ECONOMIC INDICATORS:

U.S. housing starts for April rose to an annualized rate of 1.07 million, beating the Street estimate of 980,000. Building permits were also ahead of expectations, at 1.080 million - the highest since 2008.

(955 a.m. ET) University of Michigan consumer sentiment survey. Consensus is for a reading of 84.5, higher than April's 84.1.

STOCKS TO WATCH:

CIBC said after the bell Thursday that it will record a $420-million writedown on its struggling Caribbean operations.

Bellatrix Exploration said it has experienced significant unscheduled temporary plant maintenance turnarounds at some of its third-party operated gas processing plants during May. It reduced its production volumes guidance for May as a result but said cash flows won't be impacted thanks to higher commodity prices.

Abbott Laboratories said it would acquire Latin American drug maker CFR Pharma for about $2.9-billion (U.S.) plus debt.

World Wrestling Entertainment shares are down 44 per cent in the premarket after it said its new online TV network won't make up for lost business until 2015.

J.C. Penney shares are up 15 per cent in premarket trading after late Thursday posting a narrower-than-forecast first-quarter loss and higher-than-expected sales.

Nordstrom shares are up nearly 10 per cent in the premarket after reporting quarterly results that topped expectations.

Verizon Communications shares are up nearly 2 per cent in premarket trading after Warren Buffett's Berkshire Hathaway disclosed a state in a regulatory filing late Thursday.

Other earnings today include: Onex Corp.

ANALYST ACTIONS:

Raymond James upgraded Essential Energy Services to "outperform" from "market perform" and maintained a $3 (Canadian) price target.

Wunderlich Securities upgraded Twitter to "hold" from "sell" but cut its price target to $35 (U.S.) from $38.

Deutsche Bank raised its price target on J.C. Penney to $10 (U.S.) from $6 and maintained a "hold" rating.

Macquarie downgraded Cliffs Natural Resources to "underperform" from "neutral" with a price target of $10 (U.S.).

Deutsche Bank upgraded Prudential Financial to "buy" from "hold" with a price target of $96 (U.S.).

Benchmark downgraded World Wrestling Entertainment to "hold" from "buy" and cut its price target to $19.96 (U.S.) from $29.12.

THIS MORNING'S TOP INVESTING LINKS:

The Treasury bond market is showing signs of panic.

Gold miners are looking oversold.

David Rubenstein is the latest big-name investor to express concern about market valuations.

How commodities diversify risk.

Three ETFs you probably wish you bought.

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About the Author
Investment Editor

Darcy Keith is The Globe and Mail's Investment Editor. He has been a business journalist since 1992 and joined the Report on Business in 2010 from Yahoo! Canada, where he was the senior editor of finance. More

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