Weekly insight into the marketplace.
February 27 to March 3, 2023
Markets closed February in the red
Canada’s TSX and the Wall Street benchmark stock indexes continued a familiar pattern last week: jostling between gains and losses, depending on how the day’s news and economic data could influence the pace of future U.S. Federal Reserve (the Fed) interest-rate decisions. Both Canadian and U.S. equity markets moved higher on Monday, bouncing back from the heavy losses incurred at the close of the previous week. Economic data released by the U.S. Census Bureau, on Monday, showed a 4.5% drop in new orders for manufactured durable goods. Equity markets declined on Tuesday to mark the end of February – a losing month for all four North American benchmarks. After an optimistic start to the year, supported by slowing inflation in Canada and the U.S., sentiment shifted in February; it became apparent that, while slowing, inflation could remain stubbornly high for longer than anticipated. The Fed, after raising its key rate on February 1, also resolved to continue raising rates until it sees clear signs of a healthy labour market as well as inflation moving safely toward its target range. U.S. markets declined again on Wednesday (March 1) over mixed manufacturing data, but rallied back through Thursday and Friday, ending the week with a strong performance.
Canada’s Gross Domestic Product was flat in Q4
After five consecutive quarters of growth, Canada’s economy unexpectedly stalled in the fourth quarter of 2022. According to the Statistics Canada (StatsCan) report released on Tuesday, Gross Domestic Product (GDP) was “nearly unchanged” in the three-month period ending December 31. On a monthly basis, the economy contracted by 0.1% in December, though a preliminary estimate from StatsCan is forecasting a bounce-back of 0.3% growth in January. The slowdown in Q4 caught many economists off guard, as estimates from StatsCan predicted 1.6% annualized growth and with the Bank of Canada anticipating a 1.3% expansion. The biggest drag on GDP in Q4 was a lower accumulation of inventory, as businesses slowed production due to looming recession fears. On the positive side, household spending increased 0.5% in the fourth quarter, and rose 4.8% overall in 2022.
Canadian banks reported their quarterly earnings
Quarterly results from Canada’s “big six” banks were in focus last week – with the exception of CIBC, which opened earnings season for Canadian banks on February 24 (reporting a revenue surge of 82% from the previous quarter). Scotiabank reported first-quarter profits that missed analysts’ expectations; its net income declined 35%, down to $1.77 billion from $2.74 billion a year earlier. TD reported a decline, with its $1.58-billion profit well below the $3.73 billion reported for Q1 in 2022. Earlier in the week, TD announced that it had agreed to pay more than US$1.2 billion to settle a lawsuit related to the Stanford Financial Group Ponzi scheme – one of several charges that affected the bank’s bottom line in the quarter. Royal Bank, the country’s largest lender, also saw its profits decline, from $4.10 billion in Q1 last year to $3.21 billion. Provisions for credit losses, which increased to $532 million (versus $105 million last quarter), were a key factor. Bank of Montreal saw its net income fall to $247 million, from $2.9 billion this time last year, though it still bested analysts’ expectations. National Bank’s Q1 profit was $881 million, down from $930 million a year ago.
The stock and bond market
Dow Jones Industrial Average
S&P 500 Index
10-year Canadian Bond Yield
-year U .S . Treasury Yield
WTI Crude Oil
Bank of Canada Prime Rate 6.70%
*Weekly performance ending March 3, 2023. Source:
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Bank of Canada interest-rate decision (March 8): Canada’s central bank, led by Governor Tiff Macklem, raised its overnight rate by 25 basis points at its first meeting of the year, in January. The bank has signalled that it will now pause its rate-hiking cycle, as long as key economic indicators continue to show that inflation is slowing and that the economy is in line with the bank’s outlook.
Circle these dates
March 21 to 22
: U.S. Federal Reserve interest-rate decision
: North American markets closed for Good Friday
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