May 24 to 28, 2021
What happened last week
Canada’s TSX hit multiple record highs in a holiday-shortened week
With Canadian markets closed Monday for Victoria Day, U.S. markets took centre stage, as all three major indexes hovered near record highs. Powered by tech stocks, the Dow Jones Industrial Average booked a third straight day of gains Monday, while the Nasdaq closed higher by 1.4%, and the S&P 500 gained 1%.
When Canadian market trading resumed Tuesday, it didn’t take long for the TSX to catch the U.S. benchmarks, hitting both an intra-day high (19,679.86) and a closing high (19,564.12). Of the 11 major TSX sectors, eight finished in positive territory on Tuesday with health care and technology leading the way. U.S. equity markets didn’t fare as well. The Dow snapped its three-day win-streak, and the S&P 500 and Nasdaq both saw moderate declines of 8 points and 4 points, respectively. Some of Tuesday’s negative sentiment came from U.S. Commerce Department housing data that showed new home sales dropped by 5.9% in April. Surging home prices (up 20% on year-over-year basis), and an increasingly limited supply, are threatening to slow momentum in the U.S. housing market.
Also on Tuesday, the latest U.S. consumer confidence rating held steady on a month-over-month basis. May’s rating came in at 117.2 points, down slightly from 117.5 in April. The report indicates that consumer confidence is stronger this year when compared to the same period in 2020, but still falls below pre-pandemic levels.
The health-care sector (led by cannabis stocks) and the energy sector helped the TSX bank a triple-digit gain on Wednesday. The Canadian benchmark index climbed over 181 points to reach another record close at 19,745.47. The Dow Jones industrial Average, which celebrated its 125th anniversary Wednesday, marked the occasion with a very modest 0.1% gain. The S&P 500 (0.2%) and the Nasdaq (0.6%) also registered a small increase.
The TSX scored another record high on Thursday led by consumer discretionary and energy stocks. The U.S. benchmarks finished higher (the Nasdaq the only exception) largely on the strength of positive economic data that saw weekly jobless claims drop for a fourth straight week, and a report from the Commerce Department that showed U.S. gross domestic product grew at a 6.4% annualized pace in the first quarter. On Friday, despite U.S. inflation data that confirmed consumer prices soared in April, all four major North American benchmarks ended the week in positive territory. The TSX moved within 150 points of the 20,000-point milestone.
Canada’s biggest banks reported staggering fiscal second quarter results
In what many saw as a signal that Canada is beginning to move past the financial fallout from COVID-19, the country’s biggest banks – RBC, TD and CIBC – reported that profits increased by more than 100% in the quarter ending April 30. Both RBC and TD released stockpiles of cash reserves that they had set aside to protect against loans they feared could default. That influx of cash – $96 million for RBC, and $377 million for TD – directly corresponded to their quarter earnings.
For the three-month period ending April 30, RBC’s net income jumped 171% to $4 billion, versus $1.5 billion for the same period last year. TD surged 144% with a net income of $3.7 billion. CIBC hauled in $1.7 billion, more than four times higher than the $392 million during the same period in 2020. BMO’s net income for the fiscal second quarter was $1.3 billion, up from $689 million last year. National Bank saw its quarterly net income more than double to $801 million.
The stock and bond market*
|Dow Jones Industrial Avg.
|S&P 500 Index
|10-yr GoC Yield
|10-yr U.S. Treasury Yield
|WTI Crude Oil (US$/bbl)
|Bank of Canada Prime Rate 2.45%
*Weekly performance ending May 28, 2021. Sources: www.bloomberg.com, www.bankofcanada.ca and www.treasury.gov.
U.S. and Canadian unemployment data: Both the U.S. and Canada will report unemployment figures for the month of May, offering investors deeper insight into the pace of economic recovery on both sides of the border.
Circle these dates
- June 9: Bank of Canada interest-rate announcement
- July 1: Canadian markets closed for Canada Day
- July 5: U.S. markets closed for Independence Day
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