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Short sellers are starting to bet against America's economy – CNN

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New York (CNN Business)It’s looking awful gloomy out there on Wall Street.

Traders are making big bets against retailers as recession fears gain steam. Investors are growing more skeptical of energy stocks following the spike in oil prices, according to S&P Global Market Intelligence. And investors are souring on health care as interest rates start to rise.
Short sellers are beginning to bet on a slowing economy — and against a number of industries that have fared well recently. Here’s where short interest is creeping higher.

Consumer stocks

Bearish investors are shunning consumer stocks in part because they worry that surging prices will eventually lead to an economic slowdown, perhaps even a recession.
“Consumer discretionary remained the most-shorted sector in mid-March, largely due to the impact of rising inflation on demand for nonessential goods,” according to S&P.
Short interest levels — the percentage of shares being held by investors betting that a stock will go down — rose to 5.24% for consumer discretionary stocks. That’s the highest level since mid-January 2021.
Retailers Big 5 Sporting Goods (BGFV), Citi Trends (CTRN) and Camping World Holdings (CWH) were among the most heavily shorted consumer stocks as of mid-March, according to S&P. So were electric vehicle makers Arcimoto (FUV) and Workhorse Group (WKHS).

Oil stocks

Investors aren’t nervous only about consumers. They also seem to think that skyrocketing prices of oil will soon subside, which could hurt profits and stock price momentum for energy companies. Shares of Chevron (CVX), for example, are up nearly 40% this year, making them the best performer in the Dow.
“Short interest in the energy sector, which has taken off on bets that historically high oil prices were unlikely to last, climbed to 3.91% in mid-March, its highest level since mid-October 2020,” S&P added.
S&P didn’t list specific energy companies that short sellers are circling. But oil equipment and drilling firms Transocean (RIG), Nabors (NBR) and Helmerich and Payne (HP) all had a high level of short interest, according to an analysis of companies that CNN Business conducted using stock screening tools from Refinitiv.
So did oil and gas companies such as new Warren Buffett/Berkshire Hathaway (BRKB) favorite Occidental Petroleum (OXY), EQT (EQT), Southwestern Energy (SWN) and Chesapeake (CHK).
Still, some wonder if investors betting against oil will find themselves getting hurt if the Russia-Ukraine conflict doesn’t end anytime soon.
“Oil prices will certainly continue their journey to the north making the oil companies more profitable in the coming quarters,” said Ipek Ozkardeskaya, senior analyst with Swissquote, in a recent report.
“The rising short bets also means a rising risk of a short squeeze, where investors who have bet for the prices to fall decide to close their positions — and closing a short position involves buying back the stock,” she added, noting that short squeezes have pushed meme stocks like GameStop (GME) and AMC (AMC) sharply higher since the start of 2021.

Health care stocks

Health care stocks are also being targeted by gloomy investors. The sector has benefited as a result of the Covid-19 pandemic, but as more people get vaccinated, boosted and have access to new pills that can treat coronavirus patients, health care companies may become less attractive.
Many investors have flocked to health care stocks because they feel the industry is a safe, defensive bet if the economy slows. But health care stocks may also lose some allure among conservative investors looking for solid dividend yields at a time when interest rate hikes from the Federal Reserve are likely to make long-term Treasury bonds more attractive.
Diagnostics firms Quest (DGX) and PerkinElmer (PKI), drug company Jazz Pharmaceuticals (JAZZ) and medical equipment maker Tandem Diabetes (TNDM) were among the most heavily shorted health care stocks, according to Refinitiv.

Banks get left out

Interestingly, bank stocks are not being ambushed by short sellers. It seems like investors are hoping that more rate hikes will lift loan profitability for the financial sector. According to S&P’s data, the financial services sector had the smallest increase in short interest through mid-March.
“Financials were the least shorted sector, likely due to bets that the banking sector will benefit from multiple rate hikes from the Federal Reserve this year and next,” S&P said.
According to futures that track interest rate projections, traders are pricing in a more than 80% chance that short-term rates will be at least 2.5% to 2.75% by the end of 2022. That’s up from the current level of 0.25% to 0.5%.
Big banks will start reporting their first quarter results next week. JPMorgan Chase (JPM), Citigroup (C), Wells Fargo (WFC), Goldman Sachs (GS) and Morgan Stanley (MS) are all due to release earnings the week of April 11.

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Canada’s unemployment rate holds steady at 6.5% in October, economy adds 15,000 jobs

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OTTAWA – Canada’s unemployment rate held steady at 6.5 per cent last month as hiring remained weak across the economy.

Statistics Canada’s labour force survey on Friday said employment rose by a modest 15,000 jobs in October.

Business, building and support services saw the largest gain in employment.

Meanwhile, finance, insurance, real estate, rental and leasing experienced the largest decline.

Many economists see weakness in the job market continuing in the short term, before the Bank of Canada’s interest rate cuts spark a rebound in economic growth next year.

Despite ongoing softness in the labour market, however, strong wage growth has raged on in Canada. Average hourly wages in October grew 4.9 per cent from a year ago, reaching $35.76.

Friday’s report also shed some light on the financial health of households.

According to the agency, 28.8 per cent of Canadians aged 15 or older were living in a household that had difficulty meeting financial needs – like food and housing – in the previous four weeks.

That was down from 33.1 per cent in October 2023 and 35.5 per cent in October 2022, but still above the 20.4 per cent figure recorded in October 2020.

People living in a rented home were more likely to report difficulty meeting financial needs, with nearly four in 10 reporting that was the case.

That compares with just under a quarter of those living in an owned home by a household member.

Immigrants were also more likely to report facing financial strain last month, with about four out of 10 immigrants who landed in the last year doing so.

That compares with about three in 10 more established immigrants and one in four of people born in Canada.

This report by The Canadian Press was first published Nov. 8, 2024.

The Canadian Press. All rights reserved.

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Health-care spending expected to outpace economy and reach $372 billion in 2024: CIHI

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The Canadian Institute for Health Information says health-care spending in Canada is projected to reach a new high in 2024.

The annual report released Thursday says total health spending is expected to hit $372 billion, or $9,054 per Canadian.

CIHI’s national analysis predicts expenditures will rise by 5.7 per cent in 2024, compared to 4.5 per cent in 2023 and 1.7 per cent in 2022.

This year’s health spending is estimated to represent 12.4 per cent of Canada’s gross domestic product. Excluding two years of the pandemic, it would be the highest ratio in the country’s history.

While it’s not unusual for health expenditures to outpace economic growth, the report says this could be the case for the next several years due to Canada’s growing population and its aging demographic.

Canada’s per capita spending on health care in 2022 was among the highest in the world, but still less than countries such as the United States and Sweden.

The report notes that the Canadian dental and pharmacare plans could push health-care spending even further as more people who previously couldn’t afford these services start using them.

This report by The Canadian Press was first published Nov. 7, 2024.

Canadian Press health coverage receives support through a partnership with the Canadian Medical Association. CP is solely responsible for this content.

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Trump’s victory sparks concerns over ripple effect on Canadian economy

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As Canadians wake up to news that Donald Trump will return to the White House, the president-elect’s protectionist stance is casting a spotlight on what effect his second term will have on Canada-U.S. economic ties.

Some Canadian business leaders have expressed worry over Trump’s promise to introduce a universal 10 per cent tariff on all American imports.

A Canadian Chamber of Commerce report released last month suggested those tariffs would shrink the Canadian economy, resulting in around $30 billion per year in economic costs.

More than 77 per cent of Canadian exports go to the U.S.

Canada’s manufacturing sector faces the biggest risk should Trump push forward on imposing broad tariffs, said Canadian Manufacturers and Exporters president and CEO Dennis Darby. He said the sector is the “most trade-exposed” within Canada.

“It’s in the U.S.’s best interest, it’s in our best interest, but most importantly for consumers across North America, that we’re able to trade goods, materials, ingredients, as we have under the trade agreements,” Darby said in an interview.

“It’s a more complex or complicated outcome than it would have been with the Democrats, but we’ve had to deal with this before and we’re going to do our best to deal with it again.”

American economists have also warned Trump’s plan could cause inflation and possibly a recession, which could have ripple effects in Canada.

It’s consumers who will ultimately feel the burden of any inflationary effect caused by broad tariffs, said Darby.

“A tariff tends to raise costs, and it ultimately raises prices, so that’s something that we have to be prepared for,” he said.

“It could tilt production mandates. A tariff makes goods more expensive, but on the same token, it also will make inputs for the U.S. more expensive.”

A report last month by TD economist Marc Ercolao said research shows a full-scale implementation of Trump’s tariff plan could lead to a near-five per cent reduction in Canadian export volumes to the U.S. by early-2027, relative to current baseline forecasts.

Retaliation by Canada would also increase costs for domestic producers, and push import volumes lower in the process.

“Slowing import activity mitigates some of the negative net trade impact on total GDP enough to avoid a technical recession, but still produces a period of extended stagnation through 2025 and 2026,” Ercolao said.

Since the Canada-United States-Mexico Agreement came into effect in 2020, trade between Canada and the U.S. has surged by 46 per cent, according to the Toronto Region Board of Trade.

With that deal is up for review in 2026, Canadian Chamber of Commerce president and CEO Candace Laing said the Canadian government “must collaborate effectively with the Trump administration to preserve and strengthen our bilateral economic partnership.”

“With an impressive $3.6 billion in daily trade, Canada and the United States are each other’s closest international partners. The secure and efficient flow of goods and people across our border … remains essential for the economies of both countries,” she said in a statement.

“By resisting tariffs and trade barriers that will only raise prices and hurt consumers in both countries, Canada and the United States can strengthen resilient cross-border supply chains that enhance our shared economic security.”

This report by The Canadian Press was first published Nov. 6, 2024.

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