Canada’s main stock index inched lower on Wednesday, but pared losses after the Bank of Canada forecast sluggish growth for the rest of the year while keeping interest rates steady even as it kept the door open for further rate hikes.
At 10:25 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was down 15.78 points, or 0.08%, at 18,970.71 and looked set for its sixth straight day of declines.
The Bank of Canada on Wednesday cut its 2023 growth forecast to 1.2% from the 1.8% it predicted in July.
The central bank held its key overnight rate at 5.0% as expected but was open to more rate hikes as it looks to tame inflation that could stay above its 2% target for another two years.
“The key here is BoC is probably not going to hike rates again, but they are not making the mistake they made earlier this year, suggesting that they’re on pause,” said Doug Porter, chief economist at BMO Capital Markets.
“They are really driving home the point that they still have a tightening bias, and any significant upside surprise on growth or inflation, could be met with further rate hikes.”
Heavily-weighted financial stocks fell 0.6%.
Rate-sensitive technology stocks dropped 1.3% and real estate stocks fell nearly 1%.
The yields on benchmark 10-year Treasuries gained some ground after slipping on Tuesday, further hurting rate-sensitive stocks.
Shares of Bank of Montreal fell 0.3% after Bloomberg News reported on Tuesday that the lender is exploring the sale of a portfolio of recreational vehicle loans, citing people with knowledge of the matter.
Wall Street is slumping Wednesday following a mixed set of profit reports from two of its most influential Big Tech companies.
The S&P 500 was 1% lower in morning trading, coming off its first gain in the last six days. The Dow Jones Industrial Average was down 127 points, or 0.4%, as of 10:05 a.m. Eastern time, and the Nasdaq composite was 1.4% lower.
But Alphabet was tugging the market lower even though the parent company of Google and YouTube also reported stronger profit than expected. Its stock fell 8.5% on worries about a slowdown in growth for its cloud-computing business.
Alphabet is another one of Wall Street’s biggest companies and, like Microsoft, a member of the “Magnificent Seven” group of Big Tech stocks that’s accounted for a disproportionate amount of the S&P 500′s gain this year. The Dow was holding up better than other indexes because it includes Microsoft but not Alphabet.
Also pressuring the overall stock market was a rise in longer-term Treasury yields. The 10-year yield climbed to 4.90% from 4.82% late Tuesday.
Rapidly rising yields have been knocking the stock market lower since the summer. The 10-year yield has been catching up to the Federal Reserve’s main interest rate, which is above 5.25% and at its highest level since 2001 as the central bank tries to get inflation under control.
The 10-year yield earlier this week hit its highest level above 5% since 2007, and high yields knock down prices for stocks and other investments while slowing the overall economy and adding pressure to the financial system.
Many investors have been hoping the Fed will soon cut rates to allow the system more oxygen. But they’ve had to consistently push out such predictions with each successive report on the job market that’s come in remarkably solid. Such strength has kept the economy out of a recession but could also be adding upward pressure on inflation.
Investors banking on rate cuts may depending on a playbook that’s become obsolete, said Bryant VanCronkhite, senior portfolio manager at Allspring Global Investments. He said that may be pushing them to not take seriously enough the possibility of a global recession, which would be the result of rates left too high for too long.
For more than 40 years, the Fed has come to the rescue of markets and the economy whenever trouble arose by quickly cutting interest rates. That’s because high inflation was not a problem. But now, with the trend of globalization retreating and other long-term swings pushing upward on inflation, VanCronkhite said the Fed has to worry about more than just propping up the job market.
“I think the market is still believing the U.S. Fed are a series of magicians with crystal balls that will see the problem beforehand and solve it before it becomes too serious,” he said. “I believe the Fed is under a new paradigm and will be slower to react.”
“Their focus is going to be on inflation first, economy second, in my mind. As a result, I don’t think they’ll respond quickly. In fact, I think the Fed wants a recession.”
High rates and yields have already inflicted pain on the housing market, where mortgage rates have jumped to their highest levels since 2000. The Fed’s hope is to restrain the economy enough to cool off inflation, but not so much that it creates a deep recession.
A report on Wednesday morning said sales of new homes were stronger in September than economists expected, potentially complicating things for the Fed. Sales of new homes have been mostly recovering since hitting a bottom in the summer of 2022.
In the oil market, crude prices were holding relatively steady after slumping sharply earlier this week to take some pressure off inflation. A barrel of U.S. crude was 0.2% lower at $83.58. Brent crude, the international standard, was up 0.1% at $87.25 per barrel.
U.S. oil had been above $93 last month, and it’s bounced up and down since then amid concerns that the latest Hamas-Israel war could lead to disruptions in supplies from Iran or other big oil-producing countries.
In stock markets abroad, indexes were mixed across Europe and 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.
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