Morning Minutes





Yesterday’s selloff in the US which saw major indices decline 2.0% to 2.6% continued to rattle world markets overnight, with the Hang Seng falling 2.5% the Nikkei dropping 1.5%, the Dax declining 0.6% and the FTSE slipping 0.8%. Investors appear to be taking profits in large cap names with the change in US political power now complete, and earnings season progressing.

Although there has been a flood of corporate announcements for investors to digest, the main tipping point for sentiment this week appears to have been yesterday’s stay-the-course Fed decision and statement. While the US central bank remains supportive, indicating it is not considering interest rate increases until employment improves and inflation moves back up toward 2.0%, it also didn’t hit the panic button and announce any new stimulus either. The lack of additional easy money appears to have disappointed some equity investors, but did help to shore up the US Dollar, which is up against other major currencies, precious metals and commodities this morning. For example, in currencies, the Canadian Dollar is down 0.5%, in metals, gold is down 0.4% while copper is down 0.8%, and in energy, WTI crude oil is down 0.5% while natural gas is down 1.8%.

Today’s economic news has been mixed. US Q4 GDP increased at a 4.0% annualized rate in line with expectations, but personal consumption spending grew only 1.5%, short of the 1.8% street estimate. Weekly initial jobless claims (847K vs street 875K) and continuing claims (4.77M vs street 5.05M) came in better than expected. Canadian building permits fell by 4.1% in December, less than the 5.0% drop the street had been expecting.

It’s another big day for earnings reports. American Airlines is soaring 40.1% in premarket trading after reporting a smaller than expected loss (-$3.86 vs street -$4.11). Fellow airlines Southwest and Jetblue also reported smaller losses than investors had feared.

Several companies beat the street but are down in early trading including Apple ($1.86 vs street $1.41, sales over $100B, down 2.8% premarket), Facebook ($3.88 vs street $3.22, down 0.1% premarket), clothier Levi Strauss ($0.20 vs street $0.15, down 2.2% premarket), and appliance producer Whirlpool ($6.67 vs street $6.07, down 4.1% premarket). Companies which came in short of expectations include McDonalds ($1.70 vs street $1.78) and Tesla ($0.80 vs street $1.01).

In Canada today, Rogers Communications reported essentially flat, in-line earnings ($0.99 vs street $0.98 and previous $1.00).

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Colin Cieszynski, Chief Market Strategist

Colin Cieszynski, CFA, CMT
Chief Market Strategist
+1 (647) 282-4428

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