Canada’s main stock index climbed on Wednesday, boosted by materials and financial stocks, while investors awaited more clues on the interest rate cut trajectory of the Federal Reserve for the year.
At 10:46 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was up 60.43 points, or 0.31%, at 22,144.53.
Materials-linked shares rose 0.9% as copper prices hit a two-week high, while gold prices took a breather after hitting a fresh record high.
Energy shares rose 0.5% and were set to extend their rally to a fifth session on gaining oil prices, as investors mulled supply risks stemming from global geopolitical conflicts, while OPEC+ ministers held current output cuts in a meeting.
Heavy-weight financials also rose 0.7%, while healthcare shares gained 0.6%.
The benchmark Canadian index had pulled back from a series of record closing highs in the previous session, as uncertainty around the Federal Reserve’s interest rate cut trajectory clouded investor sentiment.
“The markets and the Fed are pricing in three cuts, but now we’re starting to hear some Fed governors talking about just one or two. If we get close to June, and inflation doesn’t get closer to target, we could be down to two cuts for the rest of the year,” said Allan Small, senior investment advisor of the Allan Small Financial Group with iA Private Wealth.
In the U.S., private payrolls increased more than expected in March, while a separate reading showed U.S. services industry growth slowed in March.
Investor focus will now shift to Fed Chair Jerome Powell’s speech in the San Francisco Bay area at 12:10 p.m. ET on Wednesday.
“Powell said last time that three rate cuts are still on the table. He may say something different today and it could be market moving,” Small said.
In Canadian corporate news, shares of professional services firm WSP Global fell 4.7% after short-seller Spruce Point Capital Management shorted the company.
Lightspeed Commerce shares gained 4.9% after the payments company announced 2800 job cuts, looking to turn profitable.
U.S. stock indexes are holding steadier Wednesday following their worst day in weeks.
The S&P 500 was 0.2% higher in morning trading and clawing back a bit of its 0.7% loss from the prior day. The Dow Jones Industrial Average was up 64 points, or 0.2%, and the Nasdaq composite was 0.1% higher.
Cal-Maine Foods rose 6% after reporting stronger profit for the latest quarter than expected by selling a record number of eggs. Intel, meanwhile, sank 6.2% after disclosing financial details about key parts of its business for the first time, including its foundry business, which is losing money.
Stocks have broadly slowed their roll since screaming 26% higher from November through March. Worries are rising that a remarkably resilient U.S. economy could prevent the Federal Reserve from delivering as many cuts to interest rates this year as earlier hoped. Critics have also been saying at least a pullback was overdue after stock prices had grown expensive by several measures.
The Fed has been indicating that it still may cut its main interest rate three times this year. Lowering its main rate from the highest level since 2001 would offer relief to the economy and financial system, while also boosting prices for investments. But Fed officials say they will start cutting only if more evidence arrives to show inflation is heading down toward their goal of 2%.
Several reports on the economy have come in stronger than expected recently. Such strength is encouraging to Wall Street because it means the economy continues to avoid a recession, and it should provide support for corporate profits. But it also could add upward pressure on inflation and discourage the Fed from cutting rates.
Traders took encouragement from a report on Wednesday morning showing that construction, retail and other U.S. services businesses continued to grow last month, but not by as much as economists expected. Perhaps more importantly, the report from the Institute from Supply Management also said that an index of prices paid was at its lowest level since March 2020. That’s an encouraging trend for inflation.
That followed a report from earlier in the morning that showed stronger gains than expected in hiring within the private sector. That report from the ADP Research Institute suggested employers accelerated their hiring last month, when economists were forecasting a slowdown.
A more comprehensive report on the job market for March will arrive from the U.S. government on Friday, and it will likely be the week’s headline economic data.
Traders have already drastically reduced their expectations for how many times the Federal Reserve will cut interest rates this year, halving them from a forecast of six at the start of the year. Some are preparing for two or even zero cuts this year because the Fed may not want to begin lowering rates too close to November’s election out of fear of appearing political.
In the bond market, yields rose to raise the pressure on stocks. The 10-year yield climbed to 4.39% from 4.36% late Tuesday. It trimmed its advance following the cooler-than-expected report on U.S. services businesses.
The two-year yield, which more closely tracks with expectations for Fed action, rose to 4.71% from 4.70%.
A climb in oil prices has also been adding pressure on inflation. A barrel of benchmark U.S. crude climbed again, up 0.9% to $85.78 to bring its gain for the year so far to nearly 20%. Brent crude, the international standard, rose by a similar amount and is up more than 16% so far in 2024.
In stock markets abroad, European indexes were mixed amid modest movements. A report showed that inflation in Europe cooled by more than expected in March, but analysts say that might not be enough to move up the European Central Bank’s first cut to interest rates.
Asian markets fell more sharply earlier in the day, following up on Wall Street’s losses from Tuesday. Indexes fell 1.7% in Seoul, 1% in Tokyo and 1.2% in Hong Kong.
Reuters and The Associated Press
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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.
