Canada’s resource-heavy stock index wilted on Thursday as energy stocks fell on lower oil prices after the United States eased sanctions on Venezuela, while shares of luxury parka maker Canada Goose tumbled after brokerages downgraded the stock.
At 10:40 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was down 64.65 points, or 0.33%, at 19,386.05, hitting its lowest in more than a week.
The energy sector, which constitutes 21% of the benchmark index, fell 0.2%.
The broader consumer discretionary index fell 0.4%.
Rate-sensitive real estate sector fell more than 1% after 10-year U.S. Treasury yields jumped nearly 5%, levels not seen since the financial crisis in 2007, on prospects of no rate cuts any time soon from the U.S. Federal Reserve.
Markets will also be awaiting comments from Fed officials, including Chair Jerome Powell, later in the day for more clues on the central bank’s interest rate path.
Investors will watch for Canada’s August retail sales on Friday, followed by the crucial Bank of Canada’s (BoC) monetary policy meeting next week.
“With the additional risk of geopolitical tensions in the Middle East, most of the central banks are using that perhaps as one of the reasons on why they are going to step back,” said Jennifer Lee, senior economist, BMO Capital Markets.
Canada’s annual inflation rate unexpectedly slowed to 3.8% in September and underlying core measures also eased, data showed on Tuesday, prompting markets and analysts to trim bets for another interest rate hike next week.
“Inflation report was like the final nail in the BoC’s decision to probably stay on hold next week,” Lee added.
Canada’s producer prices grew by 0.4% in September from August on higher prices for energy and petroleum products.
Wall Street isn’t moving much Thursday, but a swirl of competing forces are pushing and pulling on financial markets under the seemingly calm surface.
The S&P 500 was 0.3% lower in morning trading following a mixed set of profit reports from Tesla and other influential stocks. The Dow Jones Industrial Average was down 135 points, or 0.4% and the Nasdaq composite was 0.1% lower.
The bond market was also shifting back and forth. Rising yields there have been the main force pushing stocks lower in recent months, and the yield on the 10-year Treasury ticked up to 4.94% from 4.91% late Wednesday. Earlier in the morning, though, it jumped above 4.98% to touch its highest level since 2007.
Crude oil prices, meanwhile, gave back some of their big jump from a day before, which was launched by worries that war in the Middle East could lead to disruptions of supplies.
With so many moving parts, much of the focus has been on Treasuries, which act as the reference point for most financial markets. The 10-year yield has been on a mostly steady march from less than 3.50% during the spring as a resilient U.S. economy forces investors to accept a new normal where the Federal Reserve likely keeps its main interest rate high for a long time.
The Fed is trying to push inflation lower, and high rates do that by dragging on investment prices, corporate profits and the overall economy. A new climate of high rates would be a harsh change for a generation of investors who have enjoyed pretty much only very low rates.
Another report came Thursday to show the U.S. job market remains remarkably solid, even though the Fed has already pulled its main rate to the highest level since 2001. Fewer U.S. workers applied for unemployment benefits last week than expected, which indicates low levels of layoffs across the country.
While that’s good for an economy that has defied predictions of a recession, it could also give inflation more fuel.
A separate report, though, said manufacturing in the mid-Atlantic region is weakening by more than economists expected. Manufacturing has been one part of the economy that’s been particularly hard hit by high interest rates.
The housing market has also felt the sting of high rates, with mortgage rates at their highest levels since 2000. A third report Thursday said sales of previously occupied homes fell last month, though not by as much as economists expected.
What happens next with yields and the value of the U.S. dollar will depend on whether the U.S. economy can indeed pull off what’s called a “soft landing,” where growth slows enough to snuff out inflation but not so much that it causes a bad recession. It will also depend on how sticky inflation is following that landing, according to Athanasios Vamvakidis, foreign-exchange strategist at Bank of America.
Vamvakidis wrote in a BofA Global Research report that he sees risks of yields and the dollar remaining high after the landing, even if they’re both lower than current levels.
High yields hurt all kinds of stocks, but they hit particularly hard on those bid up for expectations of big growth far in the future and those seen as very expensive. That’s often put the spotlight on Big Tech recently, and some reported a mixed set of profits.
On the opposite end was Netflix, which jumped 15.6%. It reported stronger profit for the latest quarter than analysts expected, and it said it would raise prices on some of its membership levels to drive more revenue.
KeyCorp rose 2.4% after reporting stronger profit than expected for the summer. It and other banks smaller in size than the industry’s biggest titans struggled earlier this year after high interest rates helped cause three high-profile bank failures.
Zions Bancorp. fell 5.5% even though it also reported stronger profit than expected for the latest quarter.
American Airlines flew 3.4% higher after reporting stronger profit than expected for the busy summer season. It and other airlines regained some of their sharp losses from a day before, when United Airlines warned that high fuel prices and the suspension of flights to Tel Aviv would eat sharply into its profits at the end of the year.
Overall, analysts expect companies across the S&P 500 index to report slight growth in their earnings per share for the summer versus a year earlier. If they do, it would be the first such growth in a year.
In the oil market, a barrel of benchmark U.S. crude fell 0.6% to $86.75. Brent crude, the international standard, fell 0.7% to $90.82. A day earlier, both jumped at least $1.60 on worries that the latest Hamas-Israel war could draw in Iran, Saudi Arabia or other big oil-producing countries.
In stock markets abroad, indexes fell across Europe after slumping more sharply across Asia.
TORONTO – Roots Corp. may have built its brand on all things comfy and cosy, but its CEO says activewear is now “really becoming a core part” of the brand.
The category, which at Roots spans leggings, tracksuits, sports bras and bike shorts, has seen such sustained double-digit growth that Meghan Roach plans to make it a key part of the business’ future.
“It’s an area … you will see us continue to expand upon,” she told analysts on a Friday call.
The Toronto-based retailer’s push into activewear has taken shape over many years and included several turns as the official designer and supplier of Team Canada’s Olympic uniform.
But consumers have had plenty of choice when it comes to workout gear and other apparel suited to their sporting needs. On top of the slew of athletic brands like Nike and Adidas, shoppers have also gravitated toward Lululemon Athletica Inc., Alo and Vuori, ramping up competition in the activewear category.
Roach feels Roots’ toehold in the category stems from the fit, feel and following its merchandise has cultivated.
“Our product really resonates with (shoppers) because you can wear it through multiple different use cases and occasions,” she said.
“We’ve been seeing customers come back again and again for some of these core products in our activewear collection.”
Her remarks came the same day as Roots revealed it lost $5.2 million in its latest quarter compared with a loss of $5.3 million in the same quarter last year.
The company said the second-quarter loss amounted to 13 cents per diluted share for the quarter ended Aug. 3, the same as a year earlier.
In presenting the results, Roach reminded analysts that the first half of the year is usually “seasonally small,” representing just 30 per cent of the company’s annual sales.
Sales for the second quarter totalled $47.7 million, down from $49.4 million in the same quarter last year.
The move lower came as direct-to-consumer sales amounted to $36.4 million, down from $37.1 million a year earlier, as comparable sales edged down 0.2 per cent.
The numbers reflect the fact that Roots continued to grapple with inventory challenges in the company’s Cooper fleece line that first cropped up in its previous quarter.
Roots recently began to use artificial intelligence to assist with daily inventory replenishments and said more tools helping with allocation will go live in the next quarter.
Beyond that time period, the company intends to keep exploring AI and renovate more of its stores.
It will also re-evaluate its design ranks.
Roots announced Friday that chief product officer Karuna Scheinfeld has stepped down.
Rather than fill the role, the company plans to hire senior level design talent with international experience in the outdoor and activewear sectors who will take on tasks previously done by the chief product officer.
This report by The Canadian Press was first published Sept. 13, 2024.
VANCOUVER – Mediated talks between the union representing HandyDART workers in Metro Vancouver and its employer, Transdev, are set to resume today as a strike that has stopped most services drags into a second week.
No timeline has been set for the length of the negotiations, but Joe McCann, president of the Amalgamated Transit Union Local 1724, says they are willing to stay there as long as it takes, even if talks drag on all night.
About 600 employees of the door-to-door transit service for people unable to navigate the conventional transit system have been on strike since last Tuesday, pausing service for all but essential medical trips.
Hundreds of drivers rallied outside TransLink’s head office earlier this week, calling for the transportation provider to intervene in the dispute with Transdev, which was contracted to oversee HandyDART service.
Transdev said earlier this week that it will provide a reply to the union’s latest proposal on Thursday.
A statement from the company said it “strongly believes” that their employees deserve fair wages, and that a fair contract “must balance the needs of their employees, clients and taxpayers.”
This report by The Canadian Press was first published Sept. 12, 2024.
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.
/cloudfront-us-east-1.images.arcpublishing.com/tgam/TZBS3AKNKFKHHGJZ7YWYW25LAI.jpg)
