U.S. corporate earnings reports to set the pace on stock markets

Gains could be elusive on the Toronto stock market after investor enthusiasm was dampened last week by soft earnings reports, tepid economic data and moves by China to curb bank lending.

Gains could be elusive on the Toronto stock market after investor enthusiasm was dampened last week by soft earnings reports, tepid economic data and moves by China to curb bank lending.

“Right now, the good news is priced into the financial markets,” said Paul Vaillancourt, director of asset allocation at Franklin Templeton Managed Investment Solutions.

“In the weeks ahead it’s going to be a bit of a see-saw type market because the good news was baked in and any negative surprise causes some profit taking.”

In the absence of market-moving economic data coming out this week, earnings will set the pace for trading. And earnings reports are more of a tough sell than they were over the past year because expectations are so much higher.

“I guess revenue of course is a key theme for the quarter,” said Patricia Croft, chief economist at RBC Global management.

“It’s all about revenues so I think there’s much more people going through this with a fine tooth comb, as opposed to thank goodness they’re actually reporting earnings.”

The major economic news of the week is the Bank of Canada’s interest rate announcement on Tuesday.

Analysts say the announcement likely won’t affect the equity markets since the central bank has widely telegraphed it has no intention of raising rates from near zero until at least the middle of the year.

“It’s a given that there will be no change (in rates) and probably no significant change in the outlook or the language associated with the announcement,” Croft said.

The Toronto stock market stepped back 2.24 per cent last week. The decline more than wiped out the gain of almost two per cent from the first week of 2010 trading.

A key volatility measure on stock markets, the VIX index, signalled a worrisome level of complacency at the start of last week, registering 16. The index hit almost 90 during some of the worst days of the financial crisis in the fall of 2008.

“The VIX was a bit of a shock,” said Croft, “Anything under 20 is a sign of complacency and complacency can be as risky as panic.”

But the markets got a splash of cold water at the start of the week when aluminum giant Alcoa missed earnings expectations and China’s central bank raised the proportion of deposits that banks must hold in reserve by half a percentage point. It also raised the yield it is offering on its one-year bills on Tuesday, its second increase in interbank markets in a week.

Investor disappointment piled up as banking giant JPMorgan Chase missed on revenue expectations.

Intel also suffered despite meeting earnings and revenue forecasts.

Analysts think a move by China to cool a hot economy will overhang market sentiment for the simple reason that investors hope the strong recovery in that country will pull other countries out of the economic slump.

The Toronto market’s commodity sectors in particular have benefited over the last 10 months from increased Chinese.

“The Chinese thing is for real,” added Vaillancourt, pointing to data showing the importance of China to the global economy.

“China’s metal consumption — its steel consumption is up over 20 per cent this (past) year. Copper consumption — people wonder why copper prices have more than doubled, well their copper consumption is up over 50 per cent this year. Capital expenditure has just surpassed Europe and the U.S.”

Get local stories you won't find anywhere else right to your inbox.
Sign up here

Just Posted

A vial of the Medicago vaccine sits on a surface. CARe Clinic, located in Red Deer, has been selected to participate in the third phase of vaccine study. (Photo courtesy www.medicago.com)
Red Deer clinical research centre participating in plant-based COVID-19 vaccine trial

A Red Deer research centre has been selected to participate in the… Continue reading

Asymptomatic testing will now be available for "priority groups" who are most likely to spread the COVID-19 virus to vulnerable or at-risk populations. File photo by THE CANADIAN PRESS
Red Deer jumps to 449 active COVID-19 cases on Sunday

1,516 new cases identified in Alberta

The QEII was closed Sunday morning due to a pole fire. (Photo courtesy City of Red Deer)
UPDATE: QEII near Red Deer reopens

The QEII has been reopened after being closed due to a pole… Continue reading

Innisfail RCMP are investigating a single-vehicle crash that happened west of Bowden on March 21, 2021. (File photo by Advocate staff)
Bashaw RCMP investigate fatal collision in central Alberta

Bashaw RCMP are investigating after a fatal collision Saturday afternoon. Police were… Continue reading

A damaged unicorn statue is shown in a field outside of Delia, Alta. in this undated handout photo. It's not often police can report that a unicorn has been found, but it was the truth Saturday when RCMP said a stolen, stainless-steel statue of the mythical beast had been located in a field not far from where he'd been taken. THE CANADIAN PRESS/HO, RCMP *MANDATORY CREDIT*
Mounties get their unicorn; stolen statue of mythical beast found in Alberta field

DELIA, Alta. — It’s not often police can report that a unicorn… Continue reading

Investigators from the Vancouver Police Department were in Chilliwack Saturday, collecting evidence connected to a double homicide. (file photo)
Police investigate shooting death of man outside downtown Vancouver restaurant

Vancouver police say one man was killed in what they believe was… Continue reading

Dr. E. Kwok administers a COVID-19 vaccine to a recipient at a vaccination clinic run by Vancouver Coastal Health, in Richmond, B.C., Saturday, April 10, 2021. THE CANADIAN PRESS/Jonathan Hayward
B.C. to start registering people 18 years and older for COVID-19 vaccines

VICTORIA — The British Columbia government says it’s inviting people 18 years… Continue reading

San Jose's Tomas Hertl, center, celebrates with teammates Patrick Marleau, left, and Rudolfs Blacers, right, after Hertl scored a goal during the first period of an NHL hockey game against the Minnesota Wild, Friday, April 16, 2021, in St. Paul, Minn. (AP Photo/Stacy Bengs)
Patrick Marleau set to break Gordie Howe’s games record

For Patrick Marleau, the best part about Monday night when he is… Continue reading

Dr. Anthony Fauci, director of the National Institute of Allergy and Infectious Diseases, speaks during a press briefing at the White House, Tuesday, April 13, 2021, in Washington. (AP Photo/Patrick Semansky)
Half of U.S. adults have received at least one COVID-19 shot

WASHINGTON — Half of all adults in the U.S. have received at… Continue reading

People are shown at a COVID-19 vaccination site in Montreal, Sunday, April 18, 2021, as the COVID-19 pandemic continues in Canada and around the world. THE CANADIAN PRESS/Graham Hughes
Federal government to send health-care workers to Ontario, Trudeau says

MONTREAL — Prime Minister Justin Trudeau says federal departments and some Canadian… Continue reading

People cross a busy street in the shopping district of Flushing on Tuesday, March 30, 2021, in the Queens borough of New York. Access to the COVID-19 vaccine in the United States is growing by the day. THE CANADIAN PRESS/AP-Kathy Willens
Despite COVID-19 vaccines, Americans in D.C. not feeling celebratory — or charitable

WASHINGTON — This might make Canadians jealous of their American cousins for… Continue reading

A man pays his respects at a roadside memorial in Portapique, N.S. on Thursday, April 23, 2021. RCMP say at least 22 people are dead after a man who at one point wore a police uniform and drove a mock-up cruiser, went on a murder rampage in Portapique and several other Nova Scotia communities. THE CANADIAN PRESS/Andrew Vaughan
Memorial service in Nova Scotia marks one year since mass shooting started

TRURO, N.S. — A memorial service is planned for today in central… Continue reading

In this April 23, 2016, photo, David Goethel sorts cod and haddock while fishing off the coast of New Hampshire. To Goethel, cod represents his identity, his ticket to middle class life, and his link to one the country's most historic industries, a fisherman who has caught New England's most recognized fish for more than 30 years. (AP Photo/Robert F. Bukaty)
‘It’s more than just a fish:’ Scientists worry cod will never come back in N.L.

ST. JOHN’S, N.L. — The latest assessment of Atlantic cod stocks, whose… Continue reading

Most Read