U.S. stocks rose as data signaled the world’s largest economy remains strong despite the Federal Reserve’s aggressive tightening campaign, bolstering the case for a so-called soft landing.
Major equity benchmarks gained as a report showed gross domestic product unexpectedly picked up steam in the second quarter, boosted by stronger-than-forecast consumer spending and robust business investment. On Wednesday, Fed Chair Jerome Powell said his staff had ditched the recession forecast it put in place in March, when banking turmoil had raised fears about a potential credit crunch.
“How much longer can Wall Street economists keep prophesying an imminent U.S. recession when economic growth remains so resilient to higher interest rates?,” said Hugh Grieves, fund manager of the Premier Miton U.S. Opportunities Fund. “It appears that the Fed is on the verge of pulling off the mythical ‘soft landing’ scenario of low unemployment and low inflation.”
The Nasdaq 100 climbed about 2 per cent as a bullish forecast from Facebook parent Meta Platforms Inc. spurred an 8 per cent rally in the shares. The S&P 500 was set for its highest since March 2022 while the Dow Jones Industrial Average advanced for a 14th straight session — on pace for a record winning run. Two-year U.S. yields and the dollar rose. West Texas Intermediate oil hovered near US$80 a barrel. European stocks held onto gains after the region’s central bank raised rates and kept options open for the next meeting.
SOFT LANDING OR RECESSION
Earlier this week, the International Monetary Fund raised its outlook for the world economy, estimating that risks have eased in recent months after the U.S. averted a default and authorities staved off a banking crisis on both sides of the Atlantic. The fund is among a growing number of voices that see a potential soft landing in the US.
Economists in a Bloomberg survey this month boosted estimates for GDP growth in the second and third quarters, although they still say there’s a 60 per cent chance the US will fall into recession in the next 12 months.
Meantime, investors are still split about the outlook for the economy: 58 per cent of respondents in JPMorgan Chase’s weekly survey expect a soft landing, while 42 per cent are bracing for a recession.
“The equity rally over the past two months implies macroeconomic scenarios that are even more positive than a soft landing and we maintain that this market action is largely a result of mechanical re-risking,” JPMorgan strategists including Marko Kolanovic wrote.
To Richard Flynn at Charles Schwab, while the solid U.S. GDP is a positive sign of a strengthening economy, high demand will also reinforce the inflationary pressures that are an “ongoing concern” for policymakers.
“As long as the labor market remains tight and inflation remains above the central bank’s 2 per cent target, we can expect to see further rate increases in coming months,” Flynn noted. “The market eagerly awaits the end of the rate hiking cycle, but may be reassured to see that policy has not yet pushed the economy closer to recession as some investors fear.”
CORPORATE HIGHLIGHTS
EBay Inc. projected earnings in the current quarter that narrowly missed analysts’ estimates, suggesting the e-commerce company is struggling to perform with a shrinking customer base.
McDonald’s Corp. reported second-quarter sales and profits that surpassed analysts’ projections, a sign that it’s still attracting diners despite tighter household budgets and higher menu prices.
Honeywell International Inc.’s profit topped analysts’ expectations as the rebound in air travel and the energy industry drove demand. The company raised the lower end of its annual earnings and sales forecast.
Harley-Davidson Inc. reported second-quarter profit that missed estimates and lowered financial guidance for the year after a production snag at its US manufacturing plant triggered a 10 per cent drop in motorcycle shipments.
Chipotle Mexican Grill Inc.’s second-quarter sales fell just short of expectations and the burrito chain’s third-quarter outlook suggested momentum is slowing.
Southwest Airlines Co. warned of higher-than-expected costs, pressuring the carrier’s earnings and countering gains from a surge in early-summer travel.
Hertz Global Holdings Inc. reported a per-share profit for the second quarter of 72 cents, beating the consensus analyst forecast of 64 cents a share as the company managed through a period of weaker used-vehicle prices in the US.
Comcast Corp. topped analysts’ estimates for profit in the second quarter, boosted by price hikes for faster broadband connections earlier in the year and an equipment upgrade offer, even as internet and TV subscribers vanished.
TORONTO – Canada Goose Holdings Inc. says it has signed a deal that will result in the creation of its first eyewear collection.
The deal announced on Thursday by the Toronto-based luxury apparel company comes in the form of an exclusive, long-term global licensing agreement with Marchon Eyewear Inc.
The terms and value of the agreement were not disclosed, but Marchon produces eyewear for brands including Lacoste, Nike, Calvin Klein, Ferragamo, Longchamp and Zeiss.
Marchon plans to roll out both sunglasses and optical wear under the Canada Goose name next spring, starting in North America.
Canada Goose says the eyewear will be sold through optical retailers, department stores, Canada Goose shops and its website.
Canada Goose CEO Dani Reiss told The Canadian Press in August that he envisioned his company eventually expanding into eyewear and luggage.
This report by The Canadian Press was first published Sept. 19, 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 – TD Bank Group, which is mired in a money laundering scandal in the U.S., says chief executive Bharat Masrani will retire next year.
Masrani, who will retire officially on April 10, 2025, says the bank’s, “anti-money laundering challenges,” took place on his watch and he takes full responsibility.
The bank named Raymond Chun, TD’s group head, Canadian personal banking, as his successor.
As part of a transition plan, Chun will become chief operating officer on Nov. 1 before taking over the top job when Masrani steps down at the bank’s annual meeting next year.
TD also announced that Riaz Ahmed, group head, wholesale banking and president and CEO of TD Securities, will retire at the end of January 2025.
TD has taken billions in charges related to ongoing U.S. investigations into the failure of its anti-money laundering program.
This report by The Canadian Press was first published Sept. 19, 2024.
