(Bloomberg) — The stock market extended this week’s gains as big tech rallied and a solid jobs report bolstered the outlook for corporate profits.
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Equities hit all-time highs, with the S&P 500 approaching 5,000 and the Nasdaq 100 up 1.7% on bullish outlooks from Meta Platforms Inc. and Amazon.com Inc. Economic optimism outweighed bets the Federal Reserve will be in no rush to cut rates. Treasury two-year yields jumped 16 basis points to 4.36%. The dollar climbed to its strongest since December.
“Today’s jobs report calls into question the narrative of a ‘soft landing’,” said David Donabedian at CIBC Private Wealth US. “The January jobs report was pretty dramatic, implying there may be ‘no landing.’ The economy is ripping ahead.”
To Neil Dutta at Renaissance Macro Research, strong growth in labor productivity means unit labor costs are under control — which is a good backdrop for company earnings. “It’s hard to get too bearish” with such economic resilience, said Bret Kenwell at eToro. Larry Tentarelli at Blue Chip Daily Trend Report sees the data as “a very bullish sign for the economy” — adding that “we are buyers on any short-term weakness in stocks.”
“Just as many were caught off guard by the recession that never appeared in 2023, there’s always the possibility that another year will go by without a recession,” said Chris Zaccarelli at Independent Advisor Alliance.
Nonfarm payrolls surged 353,000 last month following upward revisions to the prior two months. The unemployment rate held at 3.7%. Hourly wages accelerated from a month earlier, increasing by the most since March 2022. Separate data showed US consumer sentiment increased sharply.
While signs of a strong economy may continue to bode well for Corporate America, the data just reinforce the view that the Fed will delay the start of its rate cuts.
“I think we can officially kiss a March rate-cut goodbye — and more than likely a May,” said Alex McGrath at NorthEnd Private Wealth.
Fed Governor Michelle Bowman said she expects inflation to fall further with interest rates held at their current level — but noted it’s too soon for officials to consider cutting rates.
Swap contracts referencing the March Fed meeting date cut the odds of a quarter-point rate cut in half, to about 15% — while the May contract no longer fully priced in a cut, which it had for more than a month.
“A March rate cut now appears increasingly unlikely,” said Jason Pride at Glenmede. “The more likely trajectory is 2-3 cuts this year beginning around summer.”
Seema Shah at Principal Asset Management says that it wasn’t just a strong January for the labor market. It turns out that previous months were stronger than initially believed.
“The dramatic upside surprise to both jobs and wage growth means that a March rate cut must be off the table now, and a May cut is also now potentially on ice,” she noted.
Following Wednesday’s Fed decision, Chair Jerome Powell said that a cut is unlikely to come at the next gathering in March. He’ll will appear on CBS News’s 60 Minutes this Sunday to discuss inflation risks, expected rate cuts and the banking system, among other topics, the network said.
Powell’s pushback on the Fed being ready to cut rates in March now looks particularly “well timed,” according to Tiffany Wilding at Pacific Investment Management Co.
To Richard Flynn at Charles Schwab, Friday’s figures may be another factor delaying the Fed’s first rate cut closer to summer, but if the economy maintains its comfortable trajectory, that might not be a bad thing.
“What’s the hurry?” he asks.
The strong market gains remain at nearly unprecedented levels — with shifting expectations on the Fed outlook “unable to crack the momentum,” said Mark Hackett at Nationwide.
“Investors remaining on the sidelines are beginning to capitulate, which when paired with the return of share repurchases following earnings season, should act as a tailwind for markets,” Hackett noted.
Equities powered ahead Friday, led by a rally in megacaps that have driven the market surge from the bottom.
Meta, which dazzled shareholders with yet another impressive earnings report, soared 20% to a record. The surge added $197 billion to its market capitalization, the biggest single-session value addition, eclipsing the $190 billion gains made by Apple Inc. and Amazon.com Inc. in 2022.
The rush into technology stocks is resembling the dot-com era, reflecting an assumption that the economy will perform strongly despite tighter monetary policy, according to Bank of America Corp.’s Michael Hartnett.
He notes that 75% of investors expect a soft landing and 20% a no-landing scenario. Yet, while a soft landing should support a broader range of equities, the so-called Magnificent Seven accounted for 45% of the S&P 500’s return in January, reflecting a “leaning toward no landing/bubble,” he said.
In other corporate news, Apple Inc. trimmed its slide as investors looked past a deepening slump in its China business. Exxon Mobil Corp. and Chevron Corp. surpassed earnings forecasts as bigger-than-expected oil output from shale fields helped cushion the blow from weakening crude prices. A gauge of regional banks rebounded after a two-day rout.
Some of the main moves in markets:
Stocks
The S&P 500 rose 1.1% as of 4 p.m. New York time
The Nasdaq 100 rose 1.7%
The Dow Jones Industrial Average rose 0.3%
The MSCI World index rose 0.6%
Currencies
The Bloomberg Dollar Spot Index rose 0.6%
The euro fell 0.7% to $1.0793
The British pound fell 0.8% to $1.2637
The Japanese yen fell 1.3% to 148.30 per dollar
Cryptocurrencies
Bitcoin fell 0.3% to $42,945.79
Ether fell 0.3% to $2,297.85
Bonds
The yield on 10-year Treasuries advanced 14 basis points to 4.02%
Germany’s 10-year yield advanced nine basis points to 2.24%
Britain’s 10-year yield advanced 17 basis points to 3.92%
Commodities
West Texas Intermediate crude fell 2.3% to $72.14 a barrel
Spot gold fell 0.9% to $2,036.72 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Michael Mackenzie, Subrat Patnaik and Carter Johnson.
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.
