Wall Street tumbled in a broad sell-off on Tuesday as dire consumer confidence data dampened investor optimism and fueled worries that the Federal Reserve’s aggressive battle against inflation could tip the economy into recession.
The S&P 500 and the Nasdaq fell about 2% and 3%, respectively, with Apple Inc, Microsoft Corp and Amazon.com weighing the heaviest. The blue-chip Dow shed about 1.6%.
But in Canada, the TSX closed with only slim losses thanks to a rally in the energy sector. The heavyweight financials sector also held relatively steady, sheltering the Canadian benchmark index from deeper losses.
The S&P/TSX composite index ended down 35.58 points, or 0.2%, at 19,222.74, holding on to much of its gains over the previous two days.
The Toronto market’s technology sector fell 2.2%, while the materials group, which includes precious and base metals miners and fertilizer companies, ended 1.6% lower.
In contrast, energy rallied 4.2%, gaining for a third straight day, as U.S. crude oil futures settled 2% higher at $111.76 a barrel.
Supportive of oil, major producers Saudi Arabia and the United Arab Emirates looked unlikely to be able to boost output significantly while Western governments agreed to explore ways to cap the price of Russian oil.
The rally for energy in recent days offers “a glimmer of hope that the TSX can go back to outperforming some of the global markets,” said Greg Taylor, a portfolio manager at Purpose Investments.
The Toronto market has had a volatile second quarter. Still, its decline of 9.4% since the start of the year is much less than for the S&P 500, which is on track for its biggest first-half percentage drop since 1970.
All three U.S. indexes are on course to notch two straight quarterly declines for the first time since 2015.
“At some point this aggressive selling is going to dissipate but it doesn’t seem like it’s going to be anytime soon,” said Tim Ghriskey, senior portfolio strategist Ingalls & Snyder in New York.
Data released on Tuesday morning showed the Conference Board’s consumer confidence index dropping to the lowest it has been since February 2021, with near-term expectations reaching its most pessimistic level in nearly a decade.
The growing gap between the Conference Board’s “current situation” and “expectations” components have widened to levels that often precede recession.
“(Investors are) sitting there wondering whether declining consumer confidence will translate into recession and we haven’t resolved that question,” said Tom Hainlin, national investment strategist at U.S. Bank Wealth Management in Minneapolis, Minnesota. “We haven’t seen second quarter earnings reports, so we don’t know if companies are seeing a slowdown.”
The Dow Jones Industrial Average fell 491.27 points, or 1.56%, to 30,946.99; the S&P 500 lost 78.56 points, or 2.01%, to 3,821.55 and the Nasdaq Composite dropped 343.01 points, or 2.98%, to 11,181.54.
Ten of the 11 major sectors in the S&P 500 ended the session in negative territory, with consumer discretionary suffering the largest percentage loss. Energy was the sole gainer.
With few market catalysts and market participants gearing up for the July Fourth holiday weekend, the day’s sell-off cannot be blamed entirely on the Consumer Confidence report, said Tom Hainlin, national investment strategist at U.S. Bank Wealth Management in Minneapolis, Minnesota.
“It’s hard to attribute (market volatility) to one economic data point with so much noise around portfolio rebalancing at quarter-end,” Hainlin said.
“There’s not a lot of new information out there and yet you see this volatile stock environment,” he said, adding that there will not be much new information until companies start earnings.
With several weeks to go until second-quarter reporting commences, 130 S&P 500 companies have pre-announced. Of those, 45 have been positive and 77 have been negative, resulting in a negative/positive ratio of 1.7 stronger than the first quarter but weaker than a year ago, according to Refinitiv data.
Among stock moves, Nike Inc slid 7.0% following its lower than expected revenue forecast.
Shares of Occidental Petroleum Corp advanced 4.8% after Warren Buffett’s Berkshire Hathaway Inc raised its stake in the company.
Declining issues outnumbered advancing ones on the NYSE by a 2.28-to-1 ratio; on Nasdaq, a 2.70-to-1 ratio favored decliners. The S&P 500 posted one new 52-week high and 29 new lows; the Nasdaq Composite recorded 29 new highs and 131 new lows. Volume on U.S. exchanges was 11.54 billion shares, compared with the 12.99 billion average over the last 20 trading days.
Reuters, Globe staff
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MONTREAL – Travel company Transat AT Inc. reported a loss in its latest quarter compared with a profit a year earlier as its revenue edged lower.
The parent company of Air Transat says it lost $39.9 million or $1.03 per diluted share in its quarter ended July 31.
The result compared with a profit of $57.3 million or $1.49 per diluted share a year earlier.
Revenue in what was the company’s third quarter totalled $736.2 million, down from $746.3 million in the same quarter last year.
On an adjusted basis, Transat says it lost $1.10 per share in its latest quarter compared with an adjusted profit of $1.10 per share a year earlier.
Transat chief executive Annick Guérard says demand for leisure travel remains healthy, as evidenced by higher traffic, but consumers are increasingly price conscious given the current economic uncertainty.
This report by The Canadian Press was first published Sept. 12, 2024.
Dollarama Inc.’s food aisles may have expanded far beyond sweet treats or piles of gum by the checkout counter in recent years, but its chief executive maintains his company is “not in the grocery business,” even if it’s keeping an eye on the sector.
“It’s just one small part of our store,” Neil Rossy told analysts on a Wednesday call, where he was questioned about the company’s food merchandise and rivals playing in the same space.
“We will keep an eye on all retailers — like all retailers keep an eye on us — to make sure that we’re competitive and we understand what’s out there.”
Over the last decade and as consumers have more recently sought deals, Dollarama’s food merchandise has expanded to include bread and pantry staples like cereal, rice and pasta sold at prices on par or below supermarkets.
However, the competition in the discount segment of the market Dollarama operates in intensified recently when the country’s biggest grocery chain began piloting a new ultra-discount store.
The No Name stores being tested by Loblaw Cos. Ltd. in Windsor, St. Catharines and Brockville, Ont., are billed as 20 per cent cheaper than discount retail competitors including No Frills. The grocery giant is able to offer such cost savings by relying on a smaller store footprint, fewer chilled products and a hearty range of No Name merchandise.
Though Rossy brushed off notions that his company is a supermarket challenger, grocers aren’t off his radar.
“All retailers in Canada are realistic about the fact that everyone is everyone’s competition on any given item or category,” he said.
Rossy declined to reveal how much of the chain’s sales would overlap with Loblaw or the food category, arguing the vast variety of items Dollarama sells is its strength rather than its grocery products alone.
“What makes Dollarama Dollarama is a very wide assortment of different departments that somewhat represent the old five-and-dime local convenience store,” he said.
The breadth of Dollarama’s offerings helped carry the company to a second-quarter profit of $285.9 million, up from $245.8 million in the same quarter last year as its sales rose 7.4 per cent.
The retailer said Wednesday the profit amounted to $1.02 per diluted share for the 13-week period ended July 28, up from 86 cents per diluted share a year earlier.
The period the quarter covers includes the start of summer, when Rossy said the weather was “terrible.”
“The weather got slightly better towards the end of the summer and our sales certainly increased, but not enough to make up for the season’s horrible start,” he said.
Sales totalled $1.56 billion for the quarter, up from $1.46 billion in the same quarter last year.
Comparable store sales, a key metric for retailers, increased 4.7 per cent, while the average transaction was down2.2 per cent and traffic was up seven per cent, RBC analyst Irene Nattel pointed out.
She told investors in a note that the numbers reflect “solid demand as cautious consumers focus on core consumables and everyday essentials.”
Analysts have attributed such behaviour to interest rates that have been slow to drop and high prices of key consumer goods, which are weighing on household budgets.
To cope, many Canadians have spent more time seeking deals, trading down to more affordable brands and forgoing small luxuries they would treat themselves to in better economic times.
“When people feel squeezed, they tend to shy away from discretionary, focus on the basics,” Rossy said. “When people are feeling good about their wallet, they tend to be more lax about the basics and more willing to spend on discretionary.”
The current economic situation has drawn in not just the average Canadian looking to save a buck or two, but also wealthier consumers.
“When the entire economy is feeling slightly squeezed, we get more consumers who might not have to or want to shop at a Dollarama generally or who enjoy shopping at a Dollarama but have the luxury of not having to worry about the price in some other store that they happen to be standing in that has those goods,” Rossy said.
“Well, when times are tougher, they’ll consider the extra five minutes to go to the store next door.”
This report by The Canadian Press was first published Sept. 11, 2024.
TORONTO – The U.S. Consumer Financial Protection Bureau has ordered TD Bank Group to pay US$28 million for repeatedly sharing inaccurate, negative information about its customers to consumer reporting companies.
The agency says TD has to pay US$7.76 million in total to tens of thousands of victims of its illegal actions, along with a US$20 million civil penalty.
It says TD shared information that contained systemic errors about credit card and bank deposit accounts to consumer reporting companies, which can include credit reports as well as screening reports for tenants and employees and other background checks.
CFPB director Rohit Chopra says in a statement that TD threatened the consumer reports of customers with fraudulent information then “barely lifted a finger to fix it,” and that regulators will need to “focus major attention” on TD Bank to change its course.
TD says in a statement it self-identified these issues and proactively worked to improve its practices, and that it is committed to delivering on its responsibilities to its customers.
The bank also faces scrutiny in the U.S. over its anti-money laundering program where it expects to pay more than US$3 billion in monetary penalties to resolve.
This report by The Canadian Press was first published Sept. 11, 2024.
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