April 26 to 30, 2021

What happened last week

Equity markets fluctuated amid a barrage of Q1 corporate earnings reports

On top of first quarter earnings’ results from tech giants such as Tesla, Apple, Facebook and Shopify, investors also had to digest economic data and a monetary policy update from the U.S. Federal Reserve. Markets reacted unevenly with new records highs, but also a few pull backs.

Anticipation was high to begin the busiest week of the corporate earnings season on Monday. Powered by Tesla, both the S&P 500 and the Nasdaq closed with record highs, while Canada’s TSX narrowly missed its own record. Only the Dow Jones Industrial Average closed in negative territory. The electric car and clean energy company was the first tech behemoth to release first-quarter data, reporting a net income of US$438 million and a 74% sales increase. In Q1, the company generated US$10.39 billion in revenue.

Markets were flat Tuesday as investors sifted through results from Alphabet Inc. and Microsoft. Google’s parent company beat Wall Street estimates on the strength of digital ad sales; a result of advertisers bolstering their online presence during the pandemic. It’s first-quarter revenue rose to US$45.6 billion (excluding traffic acquisition costs), exceeding expectations of US$42.6 billion. Microsoft’s biggest quarterly spike in personal computer sales in two decades helped it reach US$41.7 billion in revenue. Facebook and Apple were next to report on Wednesday, announcing revenue of US$26.2 billion and US$89.6 billion respectively, while hauling in net income of US$9.5 billion and US$23.6 billion. Shopify also released its first-quarter results. Canada’s tech darling posted revenue of US$988.6 million which helped propel the TSX to a new record high. The Wall Street indexes didn’t fare as well with comments from the Federal Reserve (the Fed) on the U.S. economy leading to declines for the Dow, S&P and the Nasdaq.

The Fed stayed the course in its latest policy statement

Following a two-day meeting that concluded Wednesday, the central bank decided to maintain status quo with interest rates and its bond-buying program. This announcement came despite the bank acknowledging the accelerating economic recovery and the progress on COVID-19 vaccinations in the U.S. “We are 8.5 million jobs below February 2020,” Fed Chair Jerome Powell said. “We are a long way from our goals.” Powell once again downplayed the rise of inflation, with the bank maintaining its outlook that price increases will not persist for a long enough period of time to necessitate an interest-rate hike.

Economic data and commodity prices captured headlines

On Thursday, the U.S. Labor Department reported that first-time jobless claims fell by 553,000 over the previous week, the lowest level since the pandemic started. On the same day, the Commerce Department released data showing U.S. GDP grew at a 6.4% annualized rate in the first quarter. These reports, along with a proposed US$1.8 trillion spending package from President Joe Biden, helped U.S. equity markets bounce back. Canada’s TSX fell 0.5%.

The Canadian dollar stayed above 80 cents U.S. throughout the week, bumped by copper, which hit a 10-year high on Tuesday. The May copper contract rose to US$4.49 a pound, its highest price since 2011, representing a 91% increase from this time last year. Canadian retail sales and the GDP reading for the month of February, also made news. Retail sales were up 4.8% to $55.1 billion and GDP grew 0.4%, as reported by Statistics Canada. Both were positive signs for the Canadian economy.

All four major North American benchmarks were in negative territory at Friday’s close, but on a weekly basis, the TSX and the S&P 500 still managed to eke out a small gain.

The stock and bond market*
S&P/TSX Composite 19,108.33 0.03% 9.61%
Dow Jones Industrial Avg. 33,874.85 -0.50% 10.68%
S&P 500 Index 4,181.17 0.02% 11.32%
Nasdaq Composite 13,962.68 -0.39% 8.34%
10-yr GoC Yield 1.54% 0.03% 0.87%
10-yr U.S. Treasury Yield 1.65% 0.07% 0.72%
WTI Crude Oil (US$/bbl) 63.49 2.17% 30.85%
Canadian Dollar US$0.8140 1.66% 3.64%
Bank of Canada Prime Rate 2.45%

*Weekly performance ending April 30, 2021. Sources: www.bloomberg.com, www.bankofcanada.ca and www.treasury.gov.

What’s ahead

Economic indicators for Canada and the U.S: Mid-week, both countries are scheduled to release their latest trade data and employment figures. Investors will watch closely for signals on the pace of economic recovery in North America.

Circle these dates

  • May 17: Bank of Canada Financial System Review released
  • May 24: Canada’s TSX closed for Victoria Day holiday
  • May 31: U.S. markets closed for Memorial Day holiday

Key take-away

Review your time horizon and your risk tolerance. No one can predict when the markets will rise or fall, or by how much. This makes timing the market next to impossible. That’s why an investment strategy, from the outset, should be based on your goals, your risk tolerance and your time horizon. Our financial representatives are here to help.

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