Before the Bell: Canadian, U.S. futures struggle as recession fears mount


Equities

Wall Street futures were down in early trading Thursday morning as recession and interest rate concerns continue to weigh on market sentiment. European markets were in the red. TSX futures also struggled.

Ahead of the North American open, futures tied to the three key U.S. indexes were all underwater, suggesting a weaker start to the trading day. On Wednesday, the S&P 500 ended down 1.56 per cent for its worst daily showing since the middle of last month. The Nasdaq and Dow both closed down more than 1 per cent. Canada’s S&P/TSX Composite Index snapped its recent winning streak, finishing down 0.40 per cent.

The declines came in the wake of fresh U.S. retail sales numbers, which showed a bigger-than-forecast decline in American spending in December, suggesting a run of rate hikes is having an impact. As well, producer prices in both the United States and Canada fell more than expected, also offering hope that inflationary pressures are receding.

“The bad news would normally be good news for the stocks, if the Federal Reserve (Fed) members weren’t there to spoil the dovish Fed expectations by saying that the U.S., rates should go higher,” Swissquote senior analyst Ipek Ozkardeskaya said in an early note.

“[Cleveland Fed president] Loretta Mester said more hikes are needed, and [St. Louis Fed president] James Bullard reminded that the rates would have to stay ‘on the tighter side this year’ to help the Fed reach its 2-per-cent inflation goal.”

On Thursday, Wall Street will get the weekly reading on U.S. jobless claims, offering a snapshot of the resilient U.S. labour market. Claims for initial unemployment benefits are expected to rise to 214,000 last week, from 205,000 the week before.

In this country, wholesale sales figures for November are due. Sales for the month are expected to moderate after rising 2.1 per cent in October. The next major Canadian economic release follows on Friday morning, with retail sales numbers for November. Economists are expecting to see a monthly decline of about 0.6 per cent.

On the corporate side, earnings continue to roll in.

Streaming giant Netflix reports its latest results after the close of trading. Analysts will be watching for indications of how the service’s ad-supported tier is performing, as well as overall subscriber numbers. Netflix has said it expects to add 4.5 million subscribers in the fourth quarter. In the third quarter, subscribers rose by 2.4 million.

“The last few months have been positive ones for the Netflix share price, finding a base last May the shares have risen by more than 75 per cent since then,” CMC Markets U.K. chief market analyst Michael Hewson said.

He said Netflix has made it clear it doesn’t expect a material contribution from the new ad tier in the fourth quarter. The service launched in November.

“On the other hand, the recent weakness of the U.S .dollar should help on the revenue front,” he said. “As the company looks ahead to 2023 Netflix has said it would no longer be publishing guidance of subscriber numbers, and that they wanted investors to focus on the key metrics of revenue, operating income, margin and net income.”

Overseas,…



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