North American markets slumped on Thursday, partly on signs of a possible second wave of the pandemic in some U.S. states, deflating recent optimism that the economy could recover quickly from its worst crisis in decades.
At the closing bell, the TSX was down 650 points, or 4.1 per cent, while the Dow Jones Industrial Average sank more than 1,800 points, or 6.9 per cent. The S&P 500 dropped 188.04 points to 3,002.10, or 5.9 per cent — its worst day since mid-March, when stocks had a number of harrowing falls as the virus lockdowns began.
The Nasdaq composite, which rose above 10,000 for the first time a day earlier, lost 527.62 points, or 5.3 per cent, to 9,492.73.
The Canadian dollar was down 1.1 cents to 73.44 cents U.S., and oil futures were down $3.51, or 8.8 per cent to $36.09 U.S. per barrel.
Many market watchers have been saying that a scorching comeback in the market since late March was overdone and didn’t reflect the dire state of the economy.
At the closing bell: TSX Composite -650 points (4.1%) Dow -1,862 (6.9%) S&P 500 -188 (5.9%) NASDAQ -528 (5.3%) from a record high Wed. C$ -1.1 cents to 73.44 cents US WTI oil futures -$3.51 (8.8%) to US$36.09 pic.twitter.com/tD235hLllG
The S&P 500 rallied 44.5 per cent between late March and Monday.
The selling comes as coronavirus cases rise in the U.S., with some of the increase likely tied to the reopening of businesses and the lifting of stay-at-home orders.
Cases are rising in nearly half the states, a worrying trend that could intensify as people return to work and venture out during the summer.
Investor optimism for a speedy recovery in the economy was also dimmed by the Federal Reserve, which warned Wednesday that the road to recovery from the worst downturn in decades would be long and vowed to keep rates low for the foreseeable future.
Those factors, along with the recent run-up in stock prices, set the stage for the wave of selling Thursday, said Sal Bruno, chief investment officer at IndexIQ.
“It’s not surprising to see a bit of a sell-off, given the furious rally we’ve had coming out of the lows, despite the fact that the economy was not doing great,” Bruno said.
“The fact that [the Fed] is talking about keeping interest rates this low through 2022 is a little eye-opening for a lot of folks.”
Small-company stocks continued to bear the brunt of the selling, a signal that investors are becoming more pessimistic about a broad recovery in the economy. The Russell 2000 index fell 111.17 points, or 7.6 per cent, to 1,356.22. European and Asian markets also fell.
Bond yields fell sharply, a sign of increasing caution among investors. The price of oil also dropped 8.2 per cent as investors again worried that a slumping economy would need less energy.
Nearly all of the companies in the S&P 500 closed lower. Technology, financial, industrial and health care stocks accounted for a big slice of the market’s broad slide. Energy stocks were the biggest losers as crude oil prices fell sharply. Bond yields fell and the price of gold surged 1.1% as worried investors shifted money into the traditional safe-haven assets.
Emergency rescue efforts by the Fed and Congress helped arrest the market’s staggering 34 per cent skid in February and March. Since then, the market had been riding a wave of investor optimism that the economy will bounce back by the end of the year, if not sooner, as businesses reopen and people go back to work. But confidence in that scenario is waning as infections and fatalities continue to climb in the U.S. and elsewhere.
“Not surprisingly, a lack of preventative behavior has led to a resurgence in COVID-19 cases around the country and the stock market is having another gut check,” said Chris Zaccarelli, chief investment officer for Independent Advisor Alliance.
Investors are still waiting for more data to see whether the spike in COVID-19 cases are a sign of a possible second wave of the infection, said Charlie Ripley, senior investment strategist for Allianz Investment Management.
“We think the recovery is largely underway, but there is still some considerable uncertainty on the path we have ahead,” Ripley said. “If we see some more follow-on of people coming back to work and consumer sentiment picking up, that will be a positive sign for a faster recovery.”
Anxious investors shifted more money into government bonds Thursday, sending yields broadly lower. The yield on the 10-year Treasury yield slid to 0.66 per cent from 0.74 per cent late Wednesday, a big move. Last Friday it briefly rose above 0.90%, and it started the year at 1.92%.
The Labor Department said Thursday that about 1.5 million people applied for U.S. unemployment benefits last week, another sign that many Americans are still losing their jobs even as the economy begins to gradually reopen. The latest figure marked the 10th straight weekly decline in applications for jobless aid since they peaked in mid-March when the coronavirus hit hard. Still, the pace of layoffs remains historically high.
Other jobs data have been more encouraging. A report on Friday showed that the U.S. job market surprisingly strengthened last month as employers added 2.5 million workers to their payrolls. Economists had been expecting them instead to slash another 8 million jobs.
That report helped stoke optimism among investors that the economy can climb out of its current hole faster than forecast. But the Fed estimated Wednesday that the economy will shrink 6.5% this year, in line with other forecasts, before expanding five per cent in 2021. It also expects the unemployment rate at 9.3 per cent, near the peak of the last recession, by the end of this year. The rate is now 13.3 per cent.
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.
Dollarama Inc.’s food aisles may have expanded far beyond sweet treats or piles of gum by the checkout counter in recent years, but its chief executive maintains his company is “not in the grocery business,” even if it’s keeping an eye on the sector.
“It’s just one small part of our store,” Neil Rossy told analysts on a Wednesday call, where he was questioned about the company’s food merchandise and rivals playing in the same space.
“We will keep an eye on all retailers — like all retailers keep an eye on us — to make sure that we’re competitive and we understand what’s out there.”
Over the last decade and as consumers have more recently sought deals, Dollarama’s food merchandise has expanded to include bread and pantry staples like cereal, rice and pasta sold at prices on par or below supermarkets.
However, the competition in the discount segment of the market Dollarama operates in intensified recently when the country’s biggest grocery chain began piloting a new ultra-discount store.
The No Name stores being tested by Loblaw Cos. Ltd. in Windsor, St. Catharines and Brockville, Ont., are billed as 20 per cent cheaper than discount retail competitors including No Frills. The grocery giant is able to offer such cost savings by relying on a smaller store footprint, fewer chilled products and a hearty range of No Name merchandise.
Though Rossy brushed off notions that his company is a supermarket challenger, grocers aren’t off his radar.
“All retailers in Canada are realistic about the fact that everyone is everyone’s competition on any given item or category,” he said.
Rossy declined to reveal how much of the chain’s sales would overlap with Loblaw or the food category, arguing the vast variety of items Dollarama sells is its strength rather than its grocery products alone.
“What makes Dollarama Dollarama is a very wide assortment of different departments that somewhat represent the old five-and-dime local convenience store,” he said.
The breadth of Dollarama’s offerings helped carry the company to a second-quarter profit of $285.9 million, up from $245.8 million in the same quarter last year as its sales rose 7.4 per cent.
The retailer said Wednesday the profit amounted to $1.02 per diluted share for the 13-week period ended July 28, up from 86 cents per diluted share a year earlier.
The period the quarter covers includes the start of summer, when Rossy said the weather was “terrible.”
“The weather got slightly better towards the end of the summer and our sales certainly increased, but not enough to make up for the season’s horrible start,” he said.
Sales totalled $1.56 billion for the quarter, up from $1.46 billion in the same quarter last year.
Comparable store sales, a key metric for retailers, increased 4.7 per cent, while the average transaction was down2.2 per cent and traffic was up seven per cent, RBC analyst Irene Nattel pointed out.
She told investors in a note that the numbers reflect “solid demand as cautious consumers focus on core consumables and everyday essentials.”
Analysts have attributed such behaviour to interest rates that have been slow to drop and high prices of key consumer goods, which are weighing on household budgets.
To cope, many Canadians have spent more time seeking deals, trading down to more affordable brands and forgoing small luxuries they would treat themselves to in better economic times.
“When people feel squeezed, they tend to shy away from discretionary, focus on the basics,” Rossy said. “When people are feeling good about their wallet, they tend to be more lax about the basics and more willing to spend on discretionary.”
The current economic situation has drawn in not just the average Canadian looking to save a buck or two, but also wealthier consumers.
“When the entire economy is feeling slightly squeezed, we get more consumers who might not have to or want to shop at a Dollarama generally or who enjoy shopping at a Dollarama but have the luxury of not having to worry about the price in some other store that they happen to be standing in that has those goods,” Rossy said.
“Well, when times are tougher, they’ll consider the extra five minutes to go to the store next door.”
This report by The Canadian Press was first published Sept. 11, 2024.
TORONTO – The U.S. Consumer Financial Protection Bureau has ordered TD Bank Group to pay US$28 million for repeatedly sharing inaccurate, negative information about its customers to consumer reporting companies.
The agency says TD has to pay US$7.76 million in total to tens of thousands of victims of its illegal actions, along with a US$20 million civil penalty.
It says TD shared information that contained systemic errors about credit card and bank deposit accounts to consumer reporting companies, which can include credit reports as well as screening reports for tenants and employees and other background checks.
CFPB director Rohit Chopra says in a statement that TD threatened the consumer reports of customers with fraudulent information then “barely lifted a finger to fix it,” and that regulators will need to “focus major attention” on TD Bank to change its course.
TD says in a statement it self-identified these issues and proactively worked to improve its practices, and that it is committed to delivering on its responsibilities to its customers.
The bank also faces scrutiny in the U.S. over its anti-money laundering program where it expects to pay more than US$3 billion in monetary penalties to resolve.
This report by The Canadian Press was first published Sept. 11, 2024.
