Weekly insight into the marketplace.
November 13 to 17, 2023
Stock markets soared
Monday saw subdued trading across the major North American stock indexes, as investors braced for the next day’s U.S. inflation update. Canada's resource-heavy TSX rose 0.28%, led by strength in the tech and energy sectors. On Wall Street, the Dow Jones Industrial Average gained 0.16% to close at 34,337.87. After a streak of nine positive days out of ten – a feat that hasn’t been seen since 2011 – the S&P 500 Index was down 0.08%, closing just above the 4,400 level. The Nasdaq Composite closed down 0.22%, at 13,767.74. On Tuesday, U.S. stocks surged and bond yields sank, after the U.S. inflation reading showed a better-than-expected slowdown; this raised expectations that the U.S. Federal Reserve’s (the Fed’s) interest-rate hikes are over. The S&P 500 rose nearly 2%, as 95% of its constituent companies saw their shares jump. Tesla and Nvidia were star performers in the tech-sector, while regional banks climbed almost 6%. The TSX was also in rally mode, with financials, base metals and utilities leading the way to a 1.6% increase. Positive momentum extended into Wednesday and pushed the S&P 500 another 0.16% higher, to close above the 4,500 level. At the same time, the Dow and Nasdaq gained 0.47% and 0.07%, respectively. Adding to the boost was a solid earnings report from retail-giant Target; the U.S. Producer Price Index update – another inflation indicator watched closely by the Fed – also had producer prices showing their biggest decline since April 2020. The S&P/TSX Composite Index closed 0.17% higher, at 20,057.89, as strength in battery-metal and technology stocks minimized losses from the energy sector. On Thursday, the TSX was mostly flat (down 0.02%), with the energy and materials sectors weighing on performance. The Dow was also down 0.13%. The S&P 500 and Nasdaq managed small gains on the day, however, after jobless claims and factory-production data suggested that further interest-rate hikes won’t be needed to cool the economy. Friday’s trading saw the benchmarks extend their weekly gains into the closing bells. The TSX outperformed, climbing 0.61% to reach an eight-week high, after a data release showed Canadian producer prices were on the decline.
U.S. inflation cooled in October
The U.S. inflation rate was unchanged on a month-to-month basis (from September to October). But, last month, the consumer price index (CPI) slowed to 3.2% (down from the 3.7% in September and better than the 3.3% economists had forecast) on an annual basis. U.S. Labor Department data, released on Tuesday, showed a broad-based decrease in prices: gasoline, airfares, household furnishings, hotel accommodations and new vehicles were all lower in October. The cost for food, housing and car insurance, though, all moved higher. Core inflation – which removes the more-volatile CPI components, like food and gas – increased 0.2% monthly and 4% annually. This was lower than the forecasts of 0.3% and 4.1%, respectively. The inflation report boosted optimism that the Fed is finished raising interest rates, despite officials leaving the door open to the possibility. Speaking at a recent International Monetary Fund event, Fed Chair Jerome Powell said that the bank "is committed to achieving a stance of monetary policy that is sufficiently restrictive to bring inflation down to 2% over time.” He continued: “We are not confident that we have achieved such a stance. If it becomes appropriate to tighten policy further, we will not hesitate to do so."
Canadian grocers reported strong earnings
Loblaw and Metro reported higher profits and better-than-expected sales for the third quarter. Loblaw posted record revenue – a 5% rise to $18.3 billion for the quarter – while profit climbed to $621 million, from last year’s $556 million. Metro reported a 14% increase in sales, leading to profits of $222.2 million, compared to last year’s $168.7 million. With Canadians struggling to keep up with the higher costs of living, grocery stores have been under pressure to stabilize food prices. In October, major grocers presented plans (to the federal government) for discounts and price freezes, as well as an industry-wide code of conduct for fairer dealings between retailers and suppliers. Following the earnings reports on Wednesday, Finance Minister Chrystia Freeland suggested that more competition is needed to control food prices. She added that the federal government is "prepared to use every tool in our toolbox, including tax policy, to make sure that prices stabilize."
The stock and bond market*
|Dow Jones Industrial Average||34,947.28||1.94%||5.43%|
|S&P 500 Index||4,514.02||2.24%||17.57%|
|10-year Canadian Bond Yield||3.69%||-0.14%||0.39%|
|10-year U.S. Treasury Yield||4.44%||-0.17%||0.56%|
|WTI Crude Oil (US$/barrel)||$75.89||-1.66%||-5.44%|
|Bank of Canada Prime Rate 7.20%|
*Weekly performance ending November 17, 2023. Source: Bloomberg.
Circle these dates
November 23: U.S. stock markets closed for Thanksgiving Day
December 6: Bank of Canada interest-rate announcement
December 12 to 13: U.S. Federal Reserve meetings and statement
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