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6 p.m.

Microsoft sales rise as Alphabet misses estimates

Alphabet Inc. reported revenue and profit from its cloud business that missed analysts’ estimates, raising concerns about the company’s position in a market that is critical to its future growth.

The shares fell as much as 6.8 per cent in late trading.

As Google’s dominant search business matures, investors are looking to Google’s cloud unit to take the lead on growth. The unit reported operating income of US$266 million, missing estimates of US$434 million.

The results marred an otherwise healthy report. Third-quarter sales, excluding partner payouts, were US$64 billion, Alphabet said in a filing Tuesday. Analysts had predicted US$63 billion, according to data compiled by Bloomberg. Net income was US$1.55 per share, compared with Wall Street’s US$1.45-per-share estimate.

The company’s shares fell as low as US$129.44 in late trading, after closing at US$138.81. The shares have gained 57 per cent so far this year.

Meanwhile, Microsoft Corp. posted its strongest sales increase in six quarters, bolstered by recovering cloud-computing growth amid demand for new artificial intelligence products that are prompting corporate customers to shift back into spending mode.

Revenue in the fiscal first quarter, which ended Sept. 30, rose 13 per cent to US$56.5 billion, topping analysts’ average projections. Profit was US$2.99 a share, the company said in a statement Tuesday. Azure cloud-services sales gained 29 per cent, compared with 26 per cent growth in the previous quarter. The shares jumped more than five pre cent in late trading.

Bloomberg

5:34 p.m.

Here are Tuesday’s top three performers on the TSX

1. Lithium Americas Argentina Corp. ($8.75, +11.32%)
The Vancouver-based lithium miner that has projects in — you guessed it — Argentina, was back in the Top Three on Tuesday. The stock has been on a roll since it started trading on the TSX on Oct. 4 after splitting off from Lithium Americas Corp. Analysts currently have 15 buys, three holds and no sells on the stock, and an average 12-month price target of $30.41, according to Bloomberg.

2. Tilray Brands Inc. ($2.65, +8.61%)
There haven’t been a lot of good days for cannabis companies in recent years, but Tuesday was a winner for Tilray Brands. The move came after a week in which short interest in Tilray had surged, according to financial analytics firm S3 Partners. Analysts currently have four buys, 12 holds and one sell on the stock, and an average 12-month price target of $3.67, according to Bloomberg.

3. Ballard Power Systems Inc. ($4.81, +6.65%)
Shares of Burnaby, B.C.-based Ballard got a lift on Tuesday after an HSBC analyst upgraded the stock to a buy from hold. HSBC said in its note that Ballard, the developer and manufacturer of hydrogen fuel cells, could benefit from the United States’ regional clean hydrogen hub program, which includes stimulus of US$7 billion. Analysts currently have five buys, 16 holds and four sells on the stock, and an average 12-month price target of $7.37, according to Bloomberg.

Gigi Suhanic

5 p.m.

CN Rail profits drop nearly 25% on falling demand, B.C. port strike

Canadian National Railway Co. is reporting a nearly one-quarter drop in profits for the three months ended Sept. 30.

Canada’s largest railway says falling consumer demand and fallout from the B.C. port workers’ strike dented its cargo volumes and revenue last quarter, alongside lower fuel surcharges.

The Montreal-based company says net income in its third quarter fell 24 per cent to $1.11 billion from $1.46 billion in the same period a year earlier.

CN says revenues decreased 12 per cent to $3.99 billion from $4.51 billion the year before.

On an adjusted basis, diluted earnings were down 21 per cent at $1.69 per share from $2.13 per share last year, slightly below analyst expectations of $1.72 per share, according to financial data firm Refinitiv.

CN says it continues to expect flat to slightly negative adjusted earnings this year, adding that it forecasts growth of between 10 per cent and 15 per cent between 2024 and 2026.

The Canadian Press

4:40 p.m.

Market close: TSX posts modest loss, U.S. stock markets move higher

Canada’s main stock index moved lower today, as energy and battery metals led the way lower on a mixed day of trading, while U.S. markets rose.

The S&P/TSX composite index closed down 60.25 points at 18,986.49.

In New York, the Dow Jones industrial average was up 204.97 points at 33,141.38. The S&P 500 index was up 30.64 points at 4,247.68, while the Nasdaq composite was up 121.55 points at 13,139.88.

The Canadian dollar traded for 72.83 cents U.S. compared with 73.03 cents U.S. on Monday.

The December crude contract was down US$1.75 at US$83.74 per barrel and the December natural gas contract was up five cents at US$3.32 per mmBTU.

The December gold contract was down US$1.70 at US$1,986.10 an ounce and the December copper contract was up four cents at US$3.62 a pound.

The Canadian Press

3:46 p.m.

Trans Mountain pipeline expansion may need external funds for completion

The Canadian government-owned company expanding the country’s only oil pipeline to the Pacific Ocean may be unable to fund the rest of the project, the government’s auditor general said, just months before the project is scheduled to start operation.

Trans Mountain Corp. would need to obtain external financing since the federal government said in February 2022 that no more public money would be spent on the project, the auditor said. The expansion would nearly triple the capacity of the system by twinning the 1950s-era line that runs from Alberta to the Vancouver area.

“If the corporation cannot finance the full remaining construction of the pipeline expansion, it will be unable to put the expanded pipeline into service to generate revenue,” the Office of the Auditor General of Canada said in a commentary. “The Trans Mountain Corporation’s year-end financial statements disclosed a significant uncertainty about the Crown corporation’s ability to continue operating.”

Prime Minister Justin Trudeau’s government bought Trans Mountain in 2018 from Kinder Morgan Inc., which had threatened to scrap the expansion project amid fierce opposition in British Columbia. The project is years behind schedule as construction delays, worker fatalities, floods and the pandemic caused its price tag has more than quadruple to $30.9 billion. The expanded pipeline is scheduled to start operation at the end of the first quarter of 2024.

Trans Mountain had a syndicated credit agreement with combined available credit of $16 billion as of July 20.

Bloomberg

3:35 p.m.

Freeland says Ottawa’s fall budget will strike balance on housing, affordability

Finance Minister Chrystia Freeland says the government’s fall economic statement will focus on housing and affordability within a fiscally responsible framework.

In a news conference today, Freeland acknowledges it will be a challenging balance to strike, but says the Liberals are committed to it.

The federal government’s financial statements were published today, revealing the deficit for the 2022-23 fiscal year came in at $35.3 billion.

That’s $7.7 billion lower than projected in the spring budget.

The federal government is facing pressure to rein in spending after the COVID-19 pandemic, particularly as the economy slows.

However, it is also facing considerable pressure to address the national housing crisis, as polling shows support for the governing Liberals is taking a hit.

The Canadian Press

3:25 p.m.

BMO exploring sale of RV loan portfolio

Bank of Montreal is exploring the sale of a portfolio of recreational vehicle loans, according to people with knowledge of the matter.

The bank is in discussions with potential buyers including credit arms of alternative asset managers, the people said, asking not to be identified discussing private information. The face value of the portfolio is at least US$5 billion, some of the people said.

BMO will provide the majority of the financing backing the deal, another person said. Kelly Hechler, a spokeswoman for BMO, didn’t have an immediate comment.

Banks have been shedding assets as they seek to bolster their finances in the face of rising interest rates and macroeconomic uncertainty which threaten profits. BMO’s chief risk officer Piyush Agrawal said in December that loan sales are among levers the bank can pull to manage risk as the economic environment weakens — just as investors are putting pools of capital to work.

“There’s a mutual dialogue always happening,” Agrawal said on a conference call discussing earnings at that time. Such active risk management “continues and will continue through 2023.”

Canada’s third-largest bank by market value booked $492 million in provisions for credit losses in the third quarter, as rising borrowing costs increased potential delinquencies. The firm is currently absorbing Bank of the West — an acquisition it completed in February.

In September, BMO said it was shutting its indirect retail auto finance business as the bank shifted its resources to other areas. The firm also recently announced plans to consolidate its Canadian private wealth management business into four regions down from six, a move it said would gain clients better access to its range of services.

Bloomberg

2:10 p.m.

Investors, economists expect Bank of Canada to hold rates steady, keep hawkish bias

The slowdown economists have been warning about has arrived in Canada — and with it, the likely end of the Bank of Canada’s historic campaign of rate increases.

Growth is flat, the unemployment rate has risen, retail sales are sluggish and inflation is slowing. Those are some of the reasons why investors and economists expect governor Tiff Macklem and his governing council to keep the benchmark overnight rate unchanged at five per cent on Wednesday.

But officials are unlikely to state that they’re done. The path of future inflation is uncertain, and consumers and businesses are still anticipating an elevated rate of inflation going forward, according to surveys.

Closely watched measures of core inflation, which strip out more volatile items like gasoline, are stuck above 3.5 per cent.

Macklem won’t want to do anything that constrains the bank’s ability to raise borrowing costs again, if necessary.

“Monetary policy is likely sufficiently restrictive,” Carrie Freestone, an economist at Royal Bank of Canada, said by phone. “But I don’t think the Bank of Canada will explicitly say that they are finished hiking because they want to leave the option on the table if they need to go ahead with a hike later on.”

Macklem’s task is to sketch out the path and timeline by which inflation, which was 3.8 per cent in September, will revert to the two per cent target. The bank will give updated forecasts Wednesday in an accompanying monetary policy report, where officials are likely to talk about headwinds for consumers, who are curbing their spending in response to the highest borrowing costs in decades.

Bloomberg

Related: Look for ‘hawkish hold’ from Bank of Canada, says strategist

1:28 p.m.

Brookfield explores raising funds for Middle East deals

Brookfield Asset Management Ltd. is exploring raising separate pools of capital to invest in the Middle East, as one of this year’s most active dealmakers seeks to bolster its presence in the region, people familiar with the matter said.

The Canadian firm, which currently invests in the region through its global funds, is studying options to raise dedicated money for Gulf deals, the people said, asking not to be identified as the matter is private.

It’s seeking capital for both private equity buyouts as well as real estate transactions, according to the people.

Brookfield may look at buyouts in sectors including business services, financial infrastructure and health care, while in real estate it’s keen to invest in areas like logistics firms and industrial parks in Saudi Arabia, the people said. Deliberations are in the early stages, and it wasn’t immediately clear how much Brookfield is planning to raise.

A representative for Brookfield declined to comment.

Brookfield is already one of the largest foreign investors in the Middle East with assets of about US$8 billion across private equity and real estate. In June, it agreed to acquire Dubai-based credit card processor Network International Holdings PLC for about £2.2 billion.

It plans to combine Network International with Magnati, the payments business it took over from First Abu Dhabi Bank PJSC last year. Along with state-owned Investment Corp. of Dubai, Brookfield also owns ICD Brookfield Place, an office tower in the heart of Dubai’s financial district.

Brookfield’s Middle Eastern ties have been expanding as the region’s rulers seek to diversify their economies and open up to more foreign capital. Last year, Brookfield said it plans to set up a Saudi office, joining other large financial firms seeking to tap opportunities in the biggest Gulf economy.

Other asset managers are also seeking to raise dedicated funds for the region. BlackRock Inc. is seeking to raise an initial US$1 billion for a new Middle East infrastructure and private equity-focused fund with some of the region’s largest sovereign wealth funds, Bloomberg News reported in May. The pool of capital could eventually increase to several billion dollars, people familiar with the matter said at the time.

Bloomberg

1:13 p.m.

AI pioneers call for more regulation in new proposal

Several Canadian pioneers in artificial intelligence have signed a new document urging governments to better manage the technology’s risks as its capabilities continue to advance.

Yoshua Bengio and Geoffrey Hinton are among 24 signatories of a letter warning that AI has already surpassed some human abilities because these systems can act faster, absorb more knowledge and communicate faster than humans.

They warn further advances mean AI could exacerbate global inequities, facilitate automated warfare, orchestrate mass manipulation and pervasively surveil people.

To keep up with the pace of AI innovations and mitigate risks, the signatories are urging governments and companies to allocate one-third of their AI research and development funding to the safe and ethical use of systems.

They also want creators of AI systems to adopt safety measures that can counter their products’ dangerous capabilities and companies who make these technologies to be held liable for the harms they cause.

Bengio and Hinton, who have been nicknamed the godfathers of AI since they won the A.M. Turing Award with Yann LeCun in 2018, have become increasingly concerned over the last year with the technology they pioneered.

The Canadian Press

12:50 p.m.

Grain farmers hit by Seaway strike as management asks labour board for exception

Grain farmers, steelmakers and fertilizer shippers are all feeling the squeeze from a strike by St. Lawrence Seaway workers.

The job action by 361 Unifor members at 13 of the 15 locks along the key trade corridor kicked off Sunday, shutting it down immediately.

Crosby Devitt, who heads the Grain Farmers of Ontario, says the majority of crops yielded by the 28,000 producers he represents are exported, as farmers wrap up the soybean harvest and begin to reap corn.

Devitt says there is no export alternative to the seaway, which runs between Lake Erie and Montreal and carried $16.7-billion worth of cargo last year — nearly half of it grain and iron ore.

The St. Lawrence Seaway Management Corp. says it has applied to the Canada Industrial Relations Board for an exception on the transport of grain, a request that if granted would see the commodity flow through the artery despite the strike.

Meanwhile, Algoma Central, the biggest domestic ship operator on the Great Lakes, has said many of its ships are now docked, waiting to haul iron ore to mills in Hamilton where it will be turned into steel for the construction and auto industries.

The Canadian Press

12 p.m.

Midday markets: TSX falls as Wall Street gets lift from big-tech stocks

Canada’s main stock index edged lower in midday trading, weighed down by losses in the energy and financial sectors, while U.S. stock markets moved higher.

The S&P/TSX composite index was down 0.08 per cent points at 19,031.23.

The financials sector fell 0.53 per cent, meanwhile energy stocks were down 0.36 per cent, pushed lower by oil, which fell below US$85  a barrel amid signs the crude market’s tightness has slackened and the Israel-Hamas war is contained for the time being.

In New York, the Dow Jones industrial average was up 0.67 per cent at 33,155.80. The S&P 500 index was up 0.61 per cent at 4,242.83, while the Nasdaq composite was up 0.71 per cent at 13,110.00.

Big tech stocks are propping up the U.S. markets amid a raft of corporate earnings, with giants Microsoft Corp. and Google’s parent Alphabet Inc. reporting their numbers after the close.

“As these big tech stocks go, so does the overall market,” said David Trainer, chief executive of New Constructs. “Strong big tech earnings may just be what’s needed to end the stock market correction that started in late July. If big tech companies blow their numbers out of the water and provide strong guidance for future earnings, then we could see the stock market rally strongly through the end of the year.”

The Canadian dollar traded for 72.77 U.S. cents compared with 73.03 U.S. cents on Monday.

The December crude contract was down US$2.30 at US$83.19 per barrel.

The December gold contract was down US$7.30 at US$1,980.50 an ounce.

The Canadian Press and Bloomberg

9:55 a.m.

Markets are open: Stocks rebound in U.S. and Canada

The stock market rebounded from its longest slide in 2023 amid a raft of corporate earnings, with traders awaiting results from giants Microsoft Corp. and Google’s parent Alphabet Inc. after the close. Oil held near US$85 a barrel.

The S&P 500 halted a five-day slide, remaining above the 4,200 technical support. Verizon Communications Inc. posted earnings that beat analysts’ estimates, while Coca-Cola Co. and General Electric Co. climbed on bullish forecasts. Shares of companies linked to cryptocurrencies rallied as Bitcoin briefly topped US$35,000. Treasury 10-year yields were little changed, following Monday’s intense volatility.

Investors looking to the earnings season for a dose of good news are hanging their hopes on big tech. The five biggest companies in the S&P 500 — Apple Inc., Microsoft, Alphabet Inc., Amazon.com Inc. and Nvidia Corp. — account for about a quarter of the benchmark’s market capitalization. Their earnings are projected to jump 34 per cent from a year earlier on average, according to analyst estimates compiled by Bloomberg Intelligence.

In Canada, the S&P/TSX composite index was up 0.15 per cent, supported by gains in the information technology, utilities and consumer staples sectors.

Bloomberg, with a file from Financial Post staff

9:45 a.m.

CAE signs deal to sell health-care business for $311 million

CAE Inc. has signed a deal sell its health-care business to U.S. company Madison Industries for $311 million.

CAE chief executive Marc Parent says the decision better positions the company to secure the many attractive growth opportunities on the horizon in its much larger, core simulation and training markets.

While CAE is best known for its flight simulators, the health-care business is focused on training for medical professionals including patient simulators.

Parent says the business, which it launched in 2009, is growing under a strong leadership team and has reached a point where the opportunity exists to take it to the next level.

He says Madison Industries is well positioned to support the future growth of the business, which will continue to focus on evolving simulation to drive patient safety and quality outcomes.

The deal, which is subject to closing conditions, including regulatory approvals, is expected to close before the end of CAE’s 2024 fiscal year.

The Canadian Press

9:26 a.m.

IEA predicts peak oil demand this decade for first time

For the first time International Energy Agency predicts that global demand for oil will reach its peak this decade.

The peak, which the agency also anticipates for coal and natural gas, doesn’t mean a rapid plunge in fossil fuel consumption is imminent. It will probably be followed by “an undulating plateau lasting for many years” with emissions remaining too high to limit global warming to 1.5 C, the IEA said.

The world will consume as much as 102 million barrels a day of oil by the late 2020s, with the volumes dropping to 97 million barrels a day by mid-century, according to the base-case, called the Stated Policies Scenario, laid out on Tuesday in the IEA’s annual World Energy Outlook.

The view of the IEA, which advises industrialized nations on energy policy, stands in contrast to the forecasts of the Organization of Petroleum Exporting Countries. In its own annual outlook published earlier this month, the producers group predicted oil demand would keep growing for decades to come, reaching 116 million barrels a day in 2045.

Bloomberg

7:45 a.m.

Teck raises cost estimates for QB2 project in Chile

Teck Resources Ltd. raised the cost estimates for its QB2 copper project in Chile as it reported its latest quarterly results and lowered its production guidance for copper, molybdenum and steelmaking coal for the year.

The mining company says it now expects the QB2 project to cost between US$8.6 billion and $8.8 billion, up from earlier guidance for between US$8 billion and US$8.2 billion.

The update came as Teck says it earned a profit attributable to shareholders of $276 million or 52 cents per diluted share for the quarter ended Sept. 30 compared with a loss of $195 million or 37 cents per share a year earlier.

Revenue totalled $3.6 billion, down from $4.26 billion in the same quarter last year.

On an adjusted basis, Teck says it earned 76 cents per diluted share, down from an adjusted profit of $1.74 per diluted share a year earlier.

In its guidance, Teck lowered its annual copper production forecast to 320,000 to 365,000 tonnes from 330,000 to 375,000 tonnes for this year and cut its annual molybdenum production guidance to 3.0 million to 3.8 million pounds from 4.5 million to 6.8 million pounds. It also said it expects steelmaking coal production this year to be between 23.0 million and 23.5 million tonnes, down from earlier expectations for 24.0 million to 26.0 million tonnes.

The Canadian Press

7:30 a.m.

Macklem tells premiers their interest rate requests risk Bank of Canada’s independence

Bank of Canada governor Tiff Macklem warned premiers who publicly asked the central bank to not raise interest rates last month that their requests could undermine the institution’s independence.

The premiers of Ontario, British Columbia and Newfoundland and Labrador wrote to Macklem ahead of the Bank of Canada’s Sept. 6 rate decision, outlining concerns about the effects of higher rates on their residents and asking the central bank not to raise its key rate further.

In a Sept. 13 letter, Macklem warned that instructions or requests from elected officials could give the impression that the Bank of Canada’s independence is at risk.

The response was dated one week after the central bank governing council opted to hold its rate steady. Though Macklem acknowledged that higher interest rates are making life challenging for Canadians, he also noted that inflation, which higher interest rates are intended to combat, hurts the most vulnerable people in society.

The central bank operates independently from the federal government.

“While I am very pleased to get your perspectives on the impact of our policy decisions, instructions or requests from elected officials about how we should set interest rates could create the impression that the Bank of Canada’s operational independence is at risk. I am sure you agree that this would be unfortunate,” Macklem wrote in his responses to each of the premiers.

“Operational independence is critical to the legitimacy of the central bank, and to the effectiveness of monetary policy as a means to achieve price stability.”

Macklem’s caution, however, appears to have been sidestepped by Ontario Premier Doug Ford who has once again sent a letter urging the central bank to not raise interest rates as it prepares for a rate announcement on Wednesday.

Ford published the letter dated Oct. 22 on X, the platform previously known as Twitter, on Sunday.

The Canadian Press

Macklem warned premiers about dangers of putting Bank of Canada’s independence at risk

Related: ‘Everybody should just shut up’ — Bank of Canada’s independence under pressure from political comments

Before the opening bell: Bond markets rebound as stock traders await tech earnings

Global bond markets rebounded, with the U.S. 10-year yield sliding to 4.8 per cent, amid growing speculation that the recent sell-off was excessive. Nasdaq 100 index futures rose ahead of earnings from Microsoft Corp. and Alphabet Inc.

In Canada, the S&P/TSX composite index closed down 68.90 points at 19,046.74.

Treasury 10-year yields slipped as much as five basis points to a one-week low after reaching the highest since 2007. Europe’s Stoxx 600 index edged higher, while U.S. futures added 0.5 per cent. Bitcoin topped US$35,000 and the euro swung to a loss against the dollar as data showed the French and German economies struggling.

Treasuries are recovering after some of the market’s most prominent bears warned of an economic slowdown, stoking bets the declines have overshot and that the United States Federal Reserve will need to lower interest rates. Wild swings in government debt are unsettling investors as a resilient economy makes it hard to work out when the Fed will halt rate hikes. Surging government issuance and geopolitical tensions are also clouding the outlook.

“I don’t think you should be pounding the table saying this is the absolute best time to buy,” said Patrick Armstrong, chief investment officer at Plurimi Wealth LLP. “But I would not be shorting.”

Brent crude snapped two days of losses, climbing above US$90 per barrel.

Bloomberg

What to watch today

The New Housing Price Index for September will be released this morning.

Companies reporting earnings today include tech giants Microsoft Corp. and Alphabet Inc., along with Visa Inc., Canadian National Railway Co. Teck Resources Inc., and General Motors Co.

Need a refresher on yesterday’s top headlines? Get caught up here.

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