April 15, 2020
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Market Commentary By:
Colin Cieszynski, CFA, CMT
Chief Market Strategist
+1 (647) 282-4428
The Bank of Canada is scheduled to release its latest monetary policy decision at 10:00 am EDT today. In addition to commentary on its outlook for the Canadian economy, investors may also be watching for whether the bank increases and/or broadens its asset purchase program which started at $5B per week of federal government bonds. Reports suggest another interest rate cut is unlikely with the bank at a 0.25% lower boundary.
More bad news for the oil patch has sparked another selloff in energy commodities and appears to be having a wider impact on investor sentiment. Confirming fears in some investor camps that the recent OPEC+ deal to cut production by 9.7 mmbbl/d wasnâ€™t enough to offset the fall in demand, the International Energy Agency forecast this morning that oil demand could fall by 29 mmbbl/d. Also overnight the American Petroleum Institute reported a 13.1 mmbbl increase in weekly US oil inventories, adding to last weekâ€™s 11.9 mmbbl build and renewing concerns that the world could run out of storage capacity in the coming weeks. On this news, the US crude oil price has dropped back under $20.00/bbl, falling 2.5% toward $19.60, while Brent Crude is down 4.0% toward $28.40.
The oil drop has reignited concerns about the impact of coronavirus containment measures potentially dragging on longer and tipping the global economy into a recession, sending stock markets lower overnight. Asia Pacific trading saw the Hang Seng fall 1.1% and the Nikkei slide 0.4%. In Europe today, the FTSE and Dax are both down about 2.25%.
US index futures are down 2.0%-2.8% with Dow futures down 576 points or 2.5% as investors digest the oil price drop, weak US economic data, and another round of earnings reports centered on more of the big banks. Highlights of todayâ€™s US business news includes:
US retail sales fell 8.7%% in March, which was worse than the 8.0% the street was expecting. Retail sales excluding Autos were down 4.5%, not quite as bad as the 4.8% drop the street had anticipated. The Empire State Manufacturing Index plunged to -78.2, far worse than the street estimate of -35.0, and last monthâ€™s -21.5 reinforcing the particularly severe impact of COVID-19 on New York. US industrial production fell by 5.4% in March, which was worse than the 4.0% drop the street was expecting.
Citigroup reported an increase in loan loss reserves of $4.9B, and a drop in EPS to $1.05 from $1.87 a year ago. Surprisingly, revenues increased by 12% over year to $20.7, driven by a 39% increase in stock and bond trading income.
Bank of America posted EPS of $0.40, short of the $0.48 street estimate and down 45% from a year ago. Results differed between divisions with banking earnings falling 45%, wealth management earnings falling 17%, but trading revenues increasing 33%.
Goldman Sachs reported EPS of $3.11, down 46% over year and below the $3.35 street estimate. Revenues of $8.7B beat the $7.9B street estimate driven by increased trading business.
UnitedHealth beat the street on both EPS ($3.73 vs street $3.63) and sales ($64.4B vs street $62.2B). Management maintained its EPS guidance for this year of $16.25 to $16.55, which remains higher than the $16.21 street estimate.
Las Vegas Sands is expected to release results later today with Honeywell and Blackrock headlining tomorrow.
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