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Noah Zivitz

Managing Editor, BNN Bloomberg

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The sour mood that took hold in North America mid-yesterday afternoon is lingering this morning with global stocks trading broadly lower and amid choppy trading in U.S. futures. We’ve had Bloomberg’s Vince Cignarella telling us for days that this is looking more like a sell-the-rally than a buy-the-dip market. And, in the background yesterday, we had the “super bubble” warning from veteran value investor Jeremy Grantham, who’s calling for a near-halving of the S&P 500. We’ll gather insight into market psychology and the outlook for stocks ahead of next week’s U.S. Federal Reserve decision and as earnings season ramps up. Will quickly point out that the cautious mood is spreading to commodities, where West Texas Intermediate has been down more than three per cent this morning. 

RATE-HIKE CONVICTION COOLS

Staying mindful that our main event is coming next Wednesday at 10 a.m., there are some signals this morning that anticipation for a Jan. 26 rate hike from the Bank of Canada is losing momentum. Implied probability of a quarter-point move higher was sitting around 67 per cent first time I checked this morning, compared to almost 83 per cent on Tuesday. Also, at one point this morning the Canadian dollar was trading a half-cent below its Wednesday high of 80.31 cents U.S.

NETFLIX CRATERS

The streaming service’s disappointing subscriber growth forecast has sent its shares down more than 20 per cent in pre-market trading. Netflix is forecasting 2.5 million new paying users in the current quarter (compared to 8.28 million in the last quarter and the average estimate of 6.26 million). A reflection of a further unravelling of the stay-at-home trade? A consequence of intensifying competition? A bit of those factors? Or something else entirely? We’ll chase reaction.

OTHER NOTABLE STORIES

  • It’s not immediate or even near-term relief, but there’s some encouraging supply chain news this morning: Intel announced it’s going to spend US$20 billion on two new semiconductor factories in Ohio. Construction will begin this year, production is anticipated in late 2025.
  • Bloomberg News is reporting Petsmart is negotiating to go public via a KKR-backed SPAC at a US$14-billion valuation. Might as well point out shares in Pet Valu have plunged 16 per cent so far this year on the Toronto Stock Exchange.
  • A new RBC poll is showing a greater adoption of Registered Retirement Savings Plans, with 53 per cent of respondents to the survey saying they have RRSPs, compared to 46 per cent last year. The poll also shows young investors are less fussed by fees, as 48 per cent of respondents aged 25-34 said they’re willing to pay fees for higher returns, compared to 43 per cent of respondents aged 55+.
  • Crombie Real Estate Investment Trust is on our radar after it announced it’s raising $200 million via a bought-deal unit sale and a private placement. Crombie said the proceeds will, in part, go toward development projects.

NOTABLE RELEASES/EVENTS

  • Notable data: Canadian retail sales
  • Notable earnings: Schlumberger
  • 1000: Prime Minister Justin Trudeau makes virtual announcement alongside Housing and Diversity Minister Ahmed Hussen (plus avail)
  • 1005: Canadian Pacific Railway Chief Financial Officer Nadeem Velani addresses CIBC conference
  • 1100: Canada Mortgage and Housing Corporation CEO Romy Bowers and Superintendent of Financial Institutions Peter Routledge address House Standing Committee on Finance Hearing “Inflation in the Current Canadian Economy”
  • 1100: U.S. President Joe Biden delivers remarks on semiconductor supply chain
  • 1130: Government of Canada officials hold news conference to update COVID-19 situation