Stimulus plan could be introduced as early as today, media report says
Extended Brexit talks revive hopes for a deal with a U.K.-E.U. trade agreement
Volatility could rise this week ahead of quadruple witching day on Friday
Did you see the video footage over the weekend of those trucks leaving the Pfizer
PFE
(PFE) manufacturing plant in Michigan—the ones filled with the first shipments of the coronavirus vaccine it developed with BioNTech (BNTX)? It seems many investors did, which could be helping lift markets to start the week.
Ahead of the open Monday, stocks were regaining some of the ground lost last week. Also—in a reversal from the action late last week—the Cboe Volatility Index (VIX) has eased a bit, and crude oil futures (/CL) look to be renewing their advance toward $50. In other words, the “risk-off” sentiment that seemed to rule the end of last week may be unwinding a bit.
With the vaccine rollout underway, investors were also looking at another issue that’s been on their mind recently—potential stimulus from Congress. Reuters reported that a bipartisan plan could be introduced as early as today, news which seemed to be cheering investors. Still, it remains to be seen whether Congress can dot the Is and cross the Ts to get a deal done.
Also helping sentiment is the more congenial tone between the United Kingdom and the European Union as the deadline approaches for the U.K’s pullout from the common market.
Last week, vaccine optimism clashed with worries about rising Covid-19 infections and a worsening employment picture. It didn’t help that Brexit once again was in the headlines amid worry that the United Kingdom’s divorce from the European Union might come before a trade agreement could be reached.
One of the main things that ended up helping drag stocks lower for the week was waning investor hope for a congressional stimulus package as the debate on more federal coronavirus aid dragged on in Washington.
Wall Street seems to have sided with the Federal Reserve in thinking that more help from Capitol Hill is needed for Main Street as the pandemic continues and widespread availability of the vaccine is still a ways away.
While the Fed’s bond-buying program that covers Treasuries, corporate bonds, and mortgage-backed securities has been a big help for Wall Street, helping make these recent record highs possible, it’s also arguable that congressional stimulus such as extra unemployment help and checks deposited in bank accounts have done more for the average Joe and Jill.
Without another round of stimulus, investors and traders are apparently worried that, despite the stock market’s success this year, the pandemic’s effects on consumer spending could end up greatly delaying the economic recovery.
Fed Up to Bat This Week
Speaking of the Fed, this week investors are scheduled to get to hear more from the central bank. It’s two-day policy-setting meeting is scheduled to conclude on Wednesday afternoon.
Investors are expecting the central bank to stand pat on interest rates (100% certainty, according to the CME FedWatch tool, which uses futures prices to calculate rate-move probabilities). We’ll see if the Fed makes any comment on the need for further congressional stimulus—assuming one hasn’t been agreed on by then.
Investors also might want to know more about what the Fed thinks about the Treasury’s decision to let several emergency lending programs expire on the last day of the year and whether monetary policy makers think they have other tools than what they’ve already used to help the economy, and by extension the markets.
In addition to the Fed meeting, this week’s economic calendar also includes readings on November industrial production, retail sales, housing starts and building permits.
The weekly unemployment claims report will also likely be closely watched. The report, once a relatively sleepy affair, has come to have more significant impact on trading during the pandemic because it offers a more up-to-date reading on the labor market than the government’s monthly employment situation report.
Another thing that investors may want to keep an eye on is quadruple witching day this week. Friday is one of four days a year (once a quarter) when contracts for stock index futures, stock index options, stock options, and single-stock futures all expire.
Traditionally, markets tend to see elevated volatility around these days, so it’s possible we could see some extra price movement as the week goes on.
CHART OF THE DAY: After reaching into record territory, the S&P 500 Index (SPX—candlestick) ended up … [+] having its first down week in three, as you can see from this chart of weekly gains and losses so far this year. Stocks lost some momentum as the congressional debate over a new coronavirus stimulus package continued to drag on. Rising infection numbers, worse-than-forecast jobless claims data, and Brexit worry didn’t help. Data source: S&P Dow Jones Indices. Chart source: The thinkorswim® platform from TD Ameritrade. For illustrative purposes only. Past performance does not guarantee future results.
Data source: S&P Dow Jones Indices. Chart source: The thinkorswim® platform from TD Ameritrade.
Not Out of the Woods: Although the latest consumer sentiment index from the University of Michigan showed a surprising gain, the chief economist for the university’s Surveys of Consumers, Richard Curtin, had some sobering words. Most of the early December gain was due to a more favorable long-term outlook following the presidential election. But expectations for the year ahead for the economy and personal finances remained unchanged. “In the immediate future, job losses and income declines due to shutdowns are expected to increase, and the long priority queues before most consumers can be vaccinated will make the wait amid rising deaths all the more difficult to endure,” Curtin said in commentary accompanying the numbers. While he said a new round of federal stimulus will prevent much greater financial harm to households, small businesses, and local governments, “even if immediately adopted, the payments will not reach recipients for at least a month, allowing renewed hardships to dominate the holiday season.”
Holiday Shopping: This week, the monthly retail sales data may be particularly of interest to investors as those numbers offer a good way to get a sense of the pulse of the domestic consumer. The figures will be for November, which included Black Friday, a day many retailers rely on to get themselves out of the red and into the black. A strong showing could bode well for all of the holiday shopping season, but a poor showing might portend the opposite. A good bit of how well retailers did probably has to do with how well they were able to capitalize on promotions for online shoppers who remained at home amid the resurgence of the Covid-19 pandemic.
Glowing Embers: Inflation readings were pretty tame last week, as you might expect with the economy still weighed down by the pandemic. But there was inflation, and the fact that it registered at all seems to be a good sign. The November core consumer price index showed 0.2% month-on-month growth, which was in line with a Briefing.com consensus. And the core producer price index came in at 0.1% growth, slightly shy of a Briefing.com consensus expectation of 0.2%. When you look at annualized data for core CPI, it was 1.6%, which is well below the Fed’s 2% inflation target. (Keep in mind that the Fed’s preferred inflation gauge is the core personal consumption expenditures price index.) Some inflation can indicate a healthy economy, but too much can mean things are overheating. We seem quite far away from that latter scenario and the Fed rate tightening that would probably go with it. As Briefing.com put it, in reference to last week’s CPI report: “There aren’t any inflation alarm bells (or rate-hike bells) ringing in this report for the Fed.”
TD Ameritrade® commentary for educational purposes only. Member SIPC.
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 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.
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.
