The stock market has fully detached itself from the near-term economic realities in the U.S. stemming from the COVID-pandemic. But perhaps the market should be paying more attention to the state of the economy to inform its investing decisions, especially as valuations have climbed considerably from the late-March lows.
<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="“We are not expecting the U.S. to return to pre-crisis levels for two years. Markets seem to be a little bit more optimistic than we are, and I would say other economists are as well,” warned veteran S&P Global chief U.S. economist Beth Ann Bovino on Yahoo Finance’s The First Trade.” data-reactid=”17″>“We are not expecting the U.S. to return to pre-crisis levels for two years. Markets seem to be a little bit more optimistic than we are, and I would say other economists are as well,” warned veteran S&P Global chief U.S. economist Beth Ann Bovino on Yahoo Finance’s The First Trade.
<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Another 2.4 million workers filed for jobless benefits last week, according to new data from the government on Thursday. That brings the total number of new claims to more than 38 million over the past nine weeks.” data-reactid=”18″>Another 2.4 million workers filed for jobless benefits last week, according to new data from the government on Thursday. That brings the total number of new claims to more than 38 million over the past nine weeks.
“The sharp rise in continuing claims the week before illustrates that the easing of lockdowns in many states has not yet resulted in any large-scale recall to work for those currently on temporary layoff,” pointed out Capital Economics chief North American economist Paul Ashworth.
FILE – In this March 17, 2020, file photo, people wait in line for help with unemployment benefits at the One-Stop Career Center in Las Vegas. The number of out-of-work people filing new claims for jobless benefits in Nevada is closing in on 390,000 since casinos and other businesses were shuttered to prevent spread of the coronavirus. The U.S. Department of Labor reported Thursday, April 30, 2020, that more than 45,000 people filed first-time claims for unemployment benefits last week. (AP Photo/John Locher, File)
Elsewhere, in a new survey out Thursday, the Philadelphia Fed manufacturing index for May showed the economy continuing to bump along the bottom.
The survey found that 58% of the firms polled saw a decrease in activity this month while a mere 15% reported an increase. Although the new orders component rose 45 points from April, it was still a negative 25.7% — suggesting the economy will remain under severe pressure in the months to come.
<h3 class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="‘I am a bit more nervous’” data-reactid=”33″>‘I am a bit more nervous’
Meantime, major corporations from Walmart to Target to Macy’s continue to warn about cautious unpredictable U.S. consumers. That has led them to refrain from providing financial guidance and plan businesses conservatively for the back half of 2020.
<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="“We are seeing an improvement,” Coca-Cola Chairman and CEO James Quincey told Yahoo Finance in an interview, when asked about the current state of the beverage giant’s business. But Quincey quickly acknowledged he is staying cautious because of the volatile nature of the pandemic.” data-reactid=”35″>“We are seeing an improvement,” Coca-Cola Chairman and CEO James Quincey told Yahoo Finance in an interview, when asked about the current state of the beverage giant’s business. But Quincey quickly acknowledged he is staying cautious because of the volatile nature of the pandemic.
Even in the face of all these concerns, the stock market has plowed forward on what may be a demented logic of future economic activity. The Nasdaq Composite is just a couple hundred points away from its late February record high (and up 4% year-to-date), powered by strong inflows into big cap tech names Apple, Facebook, Amazon, Netflix and Alphabet. The Dow Jones Industrial Average and S&P 500 have each climbed about 5% inside of a month.
“I have to say I am a bit more nervous,” says Bovino on the economy. “So often I say when I’m nervous, maybe you should be, too.”
<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Brian Sozzi is an editor-at-large and co-anchor of The First Trade at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.” data-reactid=”38″>Brian Sozzi is an editor-at-large and co-anchor of The First Trade at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.
TORONTO – Canada’s main stock index was higher in late-morning trading, helped by strength in energy stocks, while U.S. stock markets also moved up.
The S&P/TSX composite index was up 34.91 points at 23,736.98.
In New York, the Dow Jones industrial average was up 178.05 points at 41,800.13. The S&P 500 index was up 28.38 points at 5,661.47, while the Nasdaq composite was up 133.17 points at 17,725.30.
The Canadian dollar traded for 73.56 cents US compared with 73.57 cents US on Monday.
The November crude oil contract was up 68 cents at US$69.70 per barrel and the October natural gas contract was up three cents at US$2.40 per mmBTU.
The December gold contract was down US$7.80 at US$2,601.10 an ounce and the December copper contract was up a penny at US$4.28 a pound.
This report by The Canadian Press was first published Sept. 17, 2024.
OTTAWA – Canada’s inflation rate fell to two per cent last month, finally hitting the Bank of Canada’s target after a tumultuous battle with skyrocketing price growth.
The annual inflation rate fell from 2.5 per cent in July to reach the lowest level since February 2021.
Statistics Canada’s consumer price index report on Tuesday attributed the slowdown in part to lower gasoline prices.
Clothing and footwear prices also decreased on a month-over-month basis, marking the first decline in the month of August since 1971 as retailers offered larger discounts to entice shoppers amid slowing demand.
The Bank of Canada’s preferred core measures of inflation, which strip out volatility in prices, also edged down in August.
The marked slowdown in price growth last month was steeper than the 2.1 per cent annual increase forecasters were expecting ahead of Tuesday’s release and will likely spark speculation of a larger interest rate cut next month from the Bank of Canada.
“Inflation remains unthreatening and the Bank of Canada should now focus on trying to stimulate the economy and halting the upward climb in the unemployment rate,” wrote CIBC senior economist Andrew Grantham.
Benjamin Reitzes, managing director of Canadian rates and macro strategist at BMO, said Tuesday’s figures “tilt the scales” slightly in favour of more aggressive cuts, though he noted the Bank of Canada will have one more inflation reading before its October rate announcement.
“If we get another big downside surprise, calls for a 50 basis-point cut will only grow louder,” wrote Reitzes in a client note.
The central bank began rapidly hiking interest rates in March 2022 in response to runaway inflation, which peaked at a whopping 8.1 per cent that summer.
The central bank increased its key lending rate to five per cent and held it at that level until June 2024, when it delivered its first rate cut in four years.
A combination of recovered global supply chains and high interest rates have helped cool price growth in Canada and around the world.
Bank of Canada governor Tiff Macklem recently signalled that the central bank is ready to increase the size of its interest rate cuts, if inflation or the economy slow by more than expected.
Its key lending rate currently stands at 4.25 per cent.
CIBC is forecasting the central bank will cut its key rate by two percentage points between now and the middle of next year.
The U.S. Federal Reserve is also expected on Wednesday to deliver its first interest rate cut in four years.
This report by The Canadian Press was first published Sept. 17, 2024.
FREDERICTON – New Brunswick‘s finance minister says the province recorded a surplus of $500.8 million for the fiscal year that ended in March.
Ernie Steeves says the amount — more than 10 times higher than the province’s original $40.3-million budget projection for the 2023-24 fiscal year — was largely the result of a strong economy and population growth.
The report of a big surplus comes as the province prepares for an election campaign, which will officially start on Thursday and end with a vote on Oct. 21.
Steeves says growth of the surplus was fed by revenue from the Harmonized Sales Tax and federal money, especially for health-care funding.
Progressive Conservative Premier Blaine Higgs has promised to reduce the HST by two percentage points to 13 per cent if the party is elected to govern next month.
Meanwhile, the province’s net debt, according to the audited consolidated financial statements, has dropped from $12.3 billion in 2022-23 to $11.8 billion in the most recent fiscal year.
Liberal critic René Legacy says having a stronger balance sheet does not eliminate issues in health care, housing and education.
This report by The Canadian Press was first published Sept. 16, 2024.
