Wall Street stocks are pushing ever further into uncharted territory as new data and corporate financials show that the economy and corporate America are still rebounding from the depths of the coronavirus crisis.
The S&P 500 has generated returns including dividends of 27 per cent so far this year as the blue-chip index has set record highs on more than 60 trading days, according to Goldman Sachs data.
Last week alone, US markets rallied 2 per cent, the best performance since June. Companies beaten down during the pandemic such as airlines, cruise operators and casinos advanced after Pfizer’s announcement on Friday that its antiviral pill successfully reduced hospitalisation rates stemming from Covid-19 by 90 per cent.
Evidence that the US economy is pulling itself out of the pandemic-induced downturn further bolstered sentiment, with the latest monthly jobs report showing a pick-up in job growth across nearly all sectors after several months of more lacklustre gains. More than 500,000 positions were created in October, and the unemployment rate fell to 4.6 per cent in a move that exceeded economists’ expectations.
The $1.2tn infrastructure spending bill passed late on Friday by the US House of Representatives could provide yet further fuel to the world’s biggest economy.
“We are on the train to normal,” said Kristina Hooper, chief global market strategist at Invesco. “We are not quite there yet but we are certainly moving in the right direction. Growth is re-accelerating and it’s helped by the new developments in Covid treatment.”
Michael Gapen, chief US economist at Barclays, also pointed to a report last week showing an uptick in US automobile sales and a survey indicating activity in the sprawling American services sector rising at an unprecedented pace. “We view incoming data this week as consistent with our expectation for improved economic momentum heading into year-end,” he said in a note to the investment bank’s clients.
Sentiment has also been bolstered by signs that large US companies are broadly managing to weather the surge in the prices of raw materials, supply chain bottlenecks and shortages in the labour market.
Earnings of companies listed on the S&P 500 rose about 40 per cent in the third quarter from the same period in 2020, according to data collated by FactSet on corporate reports issued in recent weeks.
Profit margins slipped to about 12.3 per cent from 12.6 per cent the previous quarter on aggregate, but that was still about 0.7 percentage points better than analysts had anticipated before the earnings season kick-off, according to Goldman Sachs.
“Despite lingering global supply chain disruptions and elevated inflation, companies have successfully navigated most margin headwinds by relying on pricing power,” the Wall Street investment bank noted.
The Pfizer announcement on Friday provided a further boost to investors’ confidence, with Scott Gottlieb, a former commissioner of the Food and Drug Administration and a member of Pfizer’s board, saying that the pandemic could be over by January.
Live Nation Entertainment, which puts on live concerts that have been curtailed by social restrictions during the pandemic, rose more than 20 per cent for the week, its biggest move higher since March 2020 when the Fed first stepped into financial markets to quell the downturn stemming from the pandemic. Cruise operator Royal Caribbean was also among the biggest risers for the week, up more than 14 per cent.
“We have moved into a new phase of the pandemic,” said Rebecca Patterson, director of investment research at Bridgewater, adding that the jolt higher in stock markets had also been underpinned by signals from central banks that they would only slowly unravel crisis-era stimulus measures.
The Federal Reserve took its first big step towards ending pandemic-era crisis support for financial markets on Wednesday, announcing that it would begin scaling back its $120bn-a-month asset purchase programme with an aim to end the stimulus altogether by the second half of next year.
However, Fed chair Jay Powell’s reassurance that the central bank was pursuing a patient approach when it came to raising interest rates helped to ease investors’ angst that a substantive move towards higher borrowing costs was soon forthcoming. “He is doing everything he can to avoid confusion,” said Hooper.
Additional reporting by Nicholas Megaw and Kate Duguid
OTTAWA – Bank of Canada governor Tiff Macklem says there is a lot of uncertainty around how artificial intelligence could affect the economy moving forward, including the labour market and price growth.
In a speech in Toronto at the Economics of Artificial Intelligence Conference, the governor said Friday that the central bank is approaching the issue cautiously to get a better understanding of how AI could affect its job of keeping inflation low and stable.
“Be wary of anyone who claims to know where AI will take us. There is too much uncertainty to be confident,” Macklem said in prepared remarks.
“We don’t know how quickly AI will continue to advance. And we don’t know the timing and extent of its economic and social impacts.”
The governor said AI has the potential of increasing labour productivity, which would raise living standards and grow the economy without boosting inflation.
In the short-term, he said investment in AI is adding to demand and could be inflationary.
However, Macklem also highlighted more pessimistic scenarios, where AI could destroy more jobs than it creates or lead to less competition rather than more.
The governor called on academics and businesses to work together to shed more light on the potential effects of AI on the economy.
“When you enter a dark room, you don’t go charging in. You cautiously feel your way around. And you try to find the light switch. That is what we are doing. What we central bankers need is more light,” he said.
This report by The Canadian Press was first published Sept. 20, 2024.
Almost seven years since news broke of an alleged conspiracy to fix the price of packaged bread across Canada, the saga isn’t over: the Competition Bureau continues to investigate the companies that may have been involved, and two class-action lawsuits continue to work their way through the courts.
Here’s a timeline of key events in the bread price-fixing case.
Oct. 31, 2017: The Competition Bureau says it’s investigating allegations of bread price-fixing and that it was granted search warrants in the case. Several grocers confirm they are co-operating in the probe.
Dec. 19, 2017: Loblaw and George Weston say they participated in an “industry-wide price-fixing arrangement” to raise the price of packaged bread. The companies say they have been co-operating in the Competition Bureau’s investigation since March 2015, when they self-reported to the bureau upon discovering anti-competitive behaviour, and are receiving immunity from prosecution. They announce they are offering $25 gift cards to customers amid the ongoing investigation into alleged bread price-fixing.
Jan. 31, 2018: In court documents, the Competition Bureau says at least $1.50 was added to the price of a loaf of bread between about 2001 and 2016.
Dec. 20, 2019: A class-action lawsuit in a Quebec court against multiple grocers and food companies is certified against a number of companies allegedly involved in bread price-fixing, including Loblaw, George Weston, Metro, Sobeys, Walmart Canada, Canada Bread and Giant Tiger (which have all denied involvement, except for Loblaw and George Weston, which later settled with the plaintiffs).
Dec. 31, 2021: A class-action lawsuit in an Ontario court covering all Canadian residents except those in Quebec who bought packaged bread from a company named in the suit is certified against roughly the same group of companies.
June 21, 2023: Bakery giant Canada Bread Co. is fined $50 million after pleading guilty to four counts of price-fixing under the Competition Act as part of the Competition Bureau’s ongoing investigation.
Oct. 25 2023: Canada Bread files a statement of defence in the Ontario class action denying participating in the alleged conspiracy and saying any anti-competitive behaviour it participated in was at the direction and to the benefit of its then-majority owner Maple Leaf Foods, which is not a defendant in the case (neither is its current owner Grupo Bimbo). Maple Leaf calls Canada Bread’s accusations “baseless.”
Dec. 20, 2023: Metro files new documents in the Ontario class action accusing Loblaw and its parent company George Weston of conspiring to implicate it in the alleged scheme, denying involvement. Sobeys has made a similar claim. The two companies deny the allegations.
July 25, 2024: Loblaw and George Weston say they agreed to pay a combined $500 million to settle both the Ontario and Quebec class-action lawsuits. Loblaw’s share of the settlement includes a $96-million credit for the gift cards it gave out years earlier.
Sept. 12, 2024: Canada Bread files new documents in Ontario court as part of the class action, claiming Maple Leaf used it as a “shield” to avoid liability in the alleged scheme. Maple Leaf was a majority shareholder of Canada Bread until 2014, and the company claims it’s liable for any price-fixing activity. Maple Leaf refutes the claims.
This report by The Canadian Press was first published Sept. 19, 2024.
Companies in this story: (TSX:L, TSX:MFI, TSX:MRU, TSX:EMP.A, TSX:WN)
TORONTO – Canada’s main stock index was up more than 250 points in late-morning trading, led by strength in the base metal and technology sectors, while U.S. stock markets also charged higher.
The S&P/TSX composite index was up 254.62 points at 23,847.22.
In New York, the Dow Jones industrial average was up 432.77 points at 41,935.87. The S&P 500 index was up 96.38 points at 5,714.64, while the Nasdaq composite was up 486.12 points at 18,059.42.
The Canadian dollar traded for 73.68 cents US compared with 73.58 cents US on Thursday.
The November crude oil contract was up 89 cents at US$70.77 per barrel and the October natural gas contract was down a penny at US2.27 per mmBTU.
The December gold contract was up US$9.40 at US$2,608.00 an ounce and the December copper contract was up four cents at US$4.33 a pound.
This report by The Canadian Press was first published Sept. 19, 2024.
