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Equities
U.S. stocks jumped at the open Wednesday with shares of retailers Lowe’s Cos Inc. and Target Corp. surging on strong results while investors await the afternoon release of the Federal Reserve minutes and a clue about the central bank’s plan for future rate cuts. On Bay Street, Canada’s main index started the day higher with energy stocks rising on a spike in crude prices.
At 9:30 a.m. ET, the Toronto Stock Exchange’s S&P/TSX Composite index was up 37.23 points, or 0.23 per cent, at 16,250.54. By midmorning, the energy sector was up more than 1 per cent. Six of the index’s 11 main sectors were trading in the black.
On Wall Street, the Dow Jones Industrial Average rose 182.92 points, or 0.70 per cent, at the open to 26,145.36. The S&P 500 opened 21.53 points, or 0.74 per cent, higher at 2,922.04. The Nasdaq Composite gained 68.51 points, or 0.86 per cent, to 8,017.07 at the opening bell.
The Fed minutes are set for release at 2 p.m. ET. At this point, futures have priced in a quarter point rate cut by the Fed next month with another 100 basis points by the end of next year. Wednesday’s Fed minutes - due at 2 p.m. ET - will be followed Friday with a highly anticipated speech by Fed chair Jerome Powell at the Jackson Hole Symposium in Wyoming.
“Markets are slowly grinding higher as yesterday’s slump disappears following some stability with bond yields,” OANDA analyst Edward Moya said in an early note. “A significant rally however will be difficult until traders have clarity on the Fed’s policy path.”
Market movers: Stocks seeing action on Wednesday - and why
On Bay Street, bank earnings season kicked off with results from Royal Bank. RBC posted a 5-per-cent increase in profit in the latest quarter, helped by growth in personal and commercial banking. Net income rose to $3.26-billion, or $2.22 per share, in the third quarter, from $3.11-billion, or $2.10 per share, a year earlier. RBC shares opened higher in Toronto.
Elsewhere on the Canadian landscape, markets got the latest reading on inflation in this country. Statistics Canada said the consumer price index rose 2 per cent in July from year-earlier levels. That matched June’s increase but came in higher than the 1.7 per cent markets had been expecting. On a monthly basis, the CPI rose 0.4 per cent on a seasonally adjusted basis.
South of the border, shares of home improvement retailer Lowe’s jumped more than 11 per cent in early trading after the company topped analysts’ forecasts in the latest quarter. Lowe’s posted adjusted earnings per share of US$2.15 in the latest quarter, handily beating the US$2.01 markets had been expecting. Same-store sales rose 2.3 per cent. Analysts had been forecasting a gain of 1.9 per cent.
Target shares jumped 15 per cent at the open after the retailer beat Wall Street estimates for quarterly same-store sales, benefiting from higher online sales and an increase in shoppers at its stores. The company also raised its full-year adjusted profit forecast between US$5.90 and US$6.20 per share, compared with the prior range of US$5.75 to US$6.05. Sales at establish Target stores rose 3.4 per cent in the second quarter, edging past analysts’ estimates of 3-per-cent rise, according to IBES data from Refinitiv.
Other U.S. retailers reporting Wednesday include Nordstrom and L Brands after the close.
Overseas, major European markets were higher in morning trading, despite suggestions from U.S. President Donald Trump that trade talks with the European Union haven’t been going smoothly. The pan-European STOXX 600 rose 1.27 per cent with autos among the gainers in afternoon trading.
Britain’s FTSE 100 rose 1.13 per cent. Germany’s DAX gained 1.43 per cent and France’s CAC 40 was up 1.73 per cent.
In Asia, Japan’s Nikkei finished lower following Wall Street’s hand off, falling 0.3 per cent to 20,618.57. The Shanghai Composite Index managed a 0.01 per cent gain. Hong Kong’s Hang Seng edged up 0.15 per cent.
Commodities
Crude prices advanced after the latest figures from the American Petroleum Institute showed a draw down in U.S. inventories. The gains, however, were tempered by continued concern about slowing global economic growth.
Brent crude again topped US$60 a barrel and was trading in a range for the day of US$60.07 to US$60.93. The range on West Texas Intermediate was US$56.03 to US$56.78.
Prices were bolstered by the API figures, released late Tuesday, showing that U.S. crude oil stocks fell by 3.5 million barrels in the week to Aug. 16. Analysts had been expecting a decline of 1.9 million barrels.
Stephen Innes, managing partner with VM Markets, said weekly inventory figures are likely a more critical catalyst than usual because markets are nearing the end of the peak U.S. driving season. He also noted that market response to the API figures was more moderate because traders are awaiting the more official weekly report from the U.S. Energy Information Administration. Those figures are due later Wednesday morning.
“In the meantime, the trade-related tug of war in the Oil market will probably extend until we get some semblance of clarity from the next round of US-China trade discussion,” he said.
Gold prices were down slightly and holding around the US$1,500 mark as markets await the latest Fed minutes.
Spot gold was down 0.5 per cent at US$1,499.18 per ounce, with analysts also attributing the dip to profit-booking following the metal’s recent strong run, which saw it gain more than US$80 this month, according to Reuters. U.S. gold futures slipped 0.4 per cent to US$1,509.70.
“Haven demand remains a bit muted this week due to U.S. rates uncertainty after the run of robust U.S. economic data and what’s expected to be a Jackson Hole discussion that could focus more on the melding of fiscal and monetary policy stimulus,” Mr. Innes said.
Currencies
The Canadian dollar pushed higher after Statscan reported higher-than-expected inflation in July.
The loonie jumped to the top end of the day range of 75.04 US cents to 75.40 US cents immediately after the release. Statscan said the consumer price index rose 2 per cent last month, ahead of the 1.7-per-cent increase markets had been forecast. The monthly increase of 0.4 per cent was also ahead of expectations.
CIBC economist Royce Mendes said, while consumer prices blasted ahead last month, at least some of the heat appears to come from transitory factors. For example, he noted, that air fares were a significant contributor to the change in July but that was due to a methodology change. Travel tours were also up, but they were also affected by the change in methodology. As well, gas prices supported the higher headline figure, but those too will likely reverse with fuel costs falling in recent weeks.
“For today, Canadian bond yields should rise and the Canadian dollar will likely trade stronger, but overall the report shouldn’t do much to alter thinking at the Bank of Canada as many of the moves seem likely to reverse," he said.
On broader currency markets, the U.S. dollar index was higher at 98.2228. The euro weakened to US$1.1097. The euro has moved little since Italy’s Prime Minister Giuseppe Conte resigned on Tuesday. Markets see that development as lessening the likelihood of a snap election.
In bonds, yields edged higher ahead of the afternoon release of the Fed minutes. The yield on the U.S. 10-year note was up at 1.588 per cent. The yield on the 30-year note was also higher at 2.068 per cent.
More company news
Pembina Pipeline Corp said on Wednesday it would buy Kinder Morgan Canada and the U.S. part of the Cochin Pipeline system for $4.35-billion. The all-stock deal values Kinder Morgan Canada at about $15.02 per share, representing a premium of 36.8-per-cent to stock’s Tuesday close.
RBC said Doug McGregor, head of RBC Capital Markets and RBC Investor and Treasury Services Group, will retire Jan. 31, 2020.
Fitbit Inc will collaborate with the Singapore government on a health initiative that involves the use of its fitness trackers, the company said on Wednesday. The agreement, beginning October, is to provide hundreds of thousands of consumers in Singapore with fitness trackers, CNBC reported earlier, sending shares of the company 9 per cent higher in early trading.
Economic news
Canada’s annual rate of inflation was 2 per cent in July, matching June’s increase. Markets had been expecting a reading closer to 1.7 per cent. On a monthly basis, the consumer price index rose 0.4 per cent.
The National Association of Realtors said U.S. existing home sales rose 2.5 per cent to a seasonally adjusted annual rate of 5.42 million units last month. July’s sales pace was revised slightly higher to 5.29 million units from the previously reported 5.27 million units.
(2 p.m. ET) U.S. Fed minutes for July 30-31 meeting released.
With Reuters and The Canadian Press
Terry Weber