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Investment update

Weekly insight into the marketplace.

 

July 1 to 5, 2024

Stock markets rallied

On Monday, with the TSX closed for Canada Day, the major U.S. stock markets ticked higher. The tech-heavy Nasdaq and S&P 500, looking to extend record-breaking rallies into the second half of this year, gained 0.83% and 0.27% respectively. The broader-based Dow closed 0.13% higher. The positive momentum picked up Tuesday, after comments by Federal Reserve (the Fed) Chair Jerome Powell cheered investors hoping for interest-rate cuts soon. The Nasdaq gained another 0.84% to close above the 18,000 level for the first time, while the S&P 500 gained 0.6% and broke through the 5,500 level for the first time. The Dow gained 0.41%. Canada's benchmark TSX also closed higher, posting a 0.36% gain on the day supported by strength in energy and base-metal prices. On Wednesday, during holiday-shortened trading sessions in the U.S., the S&P 500 and Nasdaq continued to climb, while the Dow was essentially flat, down 0.06%. The TSX rallied and closed 1.23% higher, near its four-week high where it continued to hover through Thursday, as U.S. markets remained closed for Independence Day. On Friday, the TSX dipped 0.83% on losses from the energy sector, while the major U.S. stock indexes all closed higher, as further employment data supported rising market sentiment that the Fed could cut rates as early as September.

Fed commentary boosted optimism

On Tuesday, while speaking on a panel at a European Central Bank conference, Fed Chair Jerome Powell acknowledged that the two most recent inflation reports (for April and May) suggest the U.S. is getting back on a disinflationary path. "We've made a lot of progress," Powell said. "We just want to understand that the levels that we're seeing are a true reading on what is actually happening with underlying inflation." On Wednesday, minutes from the Fed’s most recent policy meeting (June 11-12) also highlighted that policymakers have seen modest progress toward the central bank’s 2% target, and that "a number of developments in the product and labour markets supported their judgment that price pressures were diminishing." Powell declined to answer questions about whether the Fed will actually cut rates in September, and underscored the need for more evidence to ensure inflation is moving down sustainably, but last week’s developments were still seen as positive by investors.

Investors analyzed fresh economic data

Manufacturing data for both the U.S. and Canada was in focus on Monday. The Institute for Supply Management's Purchasing Managers' Index (PMI) showed U.S. manufacturing activity contracted in June and fell to a four-month low. The Canadian PMI (released by S&P Global Canada) showed manufacturing was unchanged in June at a seasonally adjusted level of 49.3, matching May’s output. It was the fourteenth-straight month that the Canadian PMI registered below 50.0, the longest stretch of contraction dating back to October 2010. Between Tuesday and Wednesday, investors parsed three separate U.S. labour market reports. Highlights included: 8.14 million jobs were open at the end of May, up from 7.92 million at the end of April; jobless claims for the week ending June 29 rose by 4,000 to 238,000; and U.S. companies hired workers at a slower pace in June, while wage growth cooled. Separate reports released on Friday for both Canada and the U.S. painted a similar picture. Job growth in the U.S. slowed by 206,000 jobs last month, and the unemployment rate rose to 4.1%. The Canadian economy lost 1,400 jobs in June as the unemployment rate ticked up to 6.4%, its highest level in over two years.

The stock and bond market*

Index Close Week YTD
S&P/TSX Composite 22,059.03 0.84% 5.25%
Dow Jones Industrial Average 39,375.87 0.66% 4.47%
S&P 500 Index 5,567.19 1.95% 16.72%
NASDAQ Composite 18,352.76 3.50% 22.26%
10-year Canadian Bond Yield 3.57% 0.07% 0.47%
10-year U.S. Treasury Yield 4.28% -0.08% 0.40%
WTI Crude Oil (US$/barrel) 83.16 1.99% 16.06%
Canadian Dollar US$0.7331 0.29% -2.91%
Bank of Canada Prime Rate 6.95%

*Weekly performance ending July 5, 2024. Source: Bloomberg.

Key take-away
Stay the course. The market’s day-to-day ups and downs can be stressful. But it’s important to put market performance into perspective, while keeping your goals front and centre. Staying invested – and continuing to invest – throughout market fluctuations is the best way to capitalize on likely market recoveries. If you have questions about your investments, a Co-operators financial representative is always ready to help.
What’s ahead

U.S. inflation data (July 11):  In May, consumer price inflation in the U.S. slowed to the lowest level since April 2021. Data for June, scheduled for release on Thursday, will be examined closely by investors in hopes of seeing a continuation in the steady drop in inflation that could sway the Fed to begin to lower interest rates sooner than projected.

Circle these dates 

July 24: Bank of Canada interest-rate announcement

July 31: U.S. Federal Reserve interest-rate announcement

August 5: TSX closed for Civic Holiday

September 2: Canadian and U.S. markets closed for Labour Day

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