The S&P 500 Index ($SPX) (SPY) Friday closed up +1.11%, the Dow Jones Industrials Index ($DOWI) (DIA) closed up +0.80%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed up +1.28%.
Stock indexes on Friday posted moderate gains. Stocks rallied Friday on optimism that strength in the US economy will continue to fuel consumer spending and corporate profits. Stocks rose even after Friday’s stronger-than-expected US payroll report increased the chances of higher interest rates for longer. An easing of wage pressures was also supportive for stocks after Friday’s payroll report showed that the average hourly earnings in March eased to +4.1% y/y, the smallest pace of increase in 2-3/4 years.
A negative factor for stocks was Friday’s jump in T-note yields after US payrolls rose well above expectations. March nonfarm payrolls rose +303,000, well above expectations and by the most in 10 months, bolstering expectations that the Fed will be in no hurry to cut interest rates.
Hawkish Fed comments Friday kept T-note yields higher and suggested the Fed will not cut interest rates anytime soon. Dallas Fed President Logan said “it’s much too soon” to think about cutting interest rates on concern that inflation progress could stall out and that price growth could fail to cool “in a timely way” to the Fed’s 2% target. Also, Fed Governor Bowman said she continues to see a number of upside risks to inflation, and it is “still not yet” time to lower interest rates. She added that it’s “quite possible” that the level of the federal funds rate consistent with low and stable inflation “will be higher than before the pandemic, and if that is the case, fewer rate cuts will eventually be appropriate to return our monetary policy stance to a neutral level.”
US Mar nonfarm payrolls rose +303,000, stronger than expectations of +214,000 and the biggest increase in 10 months. The Mar unemployment rate fell -0.1 to 3.8%, right on expectations.
US Mar average hourly earnings eased to +4.1% y/y from +4.3% y/y in Feb, right on expectations and the slowest pace of increase in 2-3/4 years.
US Feb consumer credit rose +$14.125 billion, below expectations of +$15.000 billion.
The markets are discounting the chances for a -25 bp rate cut at 6% for the next FOMC meeting on April 30-May 1 and 53% for the following meeting on June 11-12.
Overseas stock markets on Friday settled lower. The Euro Stoxx 50 fell to a 2-week low and closed down -1.10%. China’s Shanghai Composite was closed for the Tomb Sweeping Day holiday. Japan’s Nikkei Stock Index fell to a 3-week low and closed down -1.96%.
Interest Rates
June 10-year T-notes (ZNM24) on Friday closed down -15 ticks. The 10-year T-note yield rose +8.1 bp to 4.390%. June T-note prices retreated Friday on the larger-than-expected increase in US Mar nonfarm payrolls, reinforcing speculation the Fed will be in no hurry to cut interest rates. Also, an increase in inflation expectations undercut T-note prices as the 10-year breakeven inflation rate Friday rose to a 4-3/4 month high of 2.399%. T-notes maintained their losses on hawkish comments from Dallas Fed President Logan and Fed Governor Bowman, who said it’s “much too soon” to think about cutting interest rates.
T-notes garnered some support Friday from easing US wage pressures after Mar average hourly earnings eased to +4.1% y/y, the smallest pace of increase in 2-3/4 years.
European government bond yields on Friday moved higher. The 10-year German bund yield rose +3.8 bp to 2.399%. The 10-year UK gilt yield rose +4.8 bp to 4.069%.
Eurozone Feb retail sales fell -0.5% m/m, weaker than expectations of -0.4% m/m.
German Feb factory orders rose +0.2% m/m, weaker than expectations of +0.7% m/m.
The German Feb import price index fell -0.2% m/m and -4.9% y/y, weaker than expectations of unchanged m/m and -4.6% y/y.
US Stock Movers
Newmont (NEM) closed up more than +5% after gold prices rallied to a record high and silver prices climbed to a 2-year high.
Western Digital (WDC) closed up more than +3% after Rosenblatt Securities upgraded the stock to buy from neutral with a price target of $115.
Arch Capital Group Ltd (ACGL) closed up more than +3% after its insurance unit announced that it will buy Allianz Global’s US MidCorp and Entertainment Insurance businesses for $450 million.
Uber Technologies (UBER) closed up more than +3% after Jeffries raised its price target on the stock to $100 from $95.
Eaton Corp Plc (ETN) closed up more than +3% after RBC Capital Markets upgraded the stock to outperform from sector perform with a price target of $371.
Chip stocks rallied Friday and supported gains in the technology sector. Nvidia (NVDA), Advanced Micro Devices (AMD), ASML Holding NV (ASML), and Applied Materials (AMAT) closed up more than +2%. Also, Broadcom (AVGO), Marvell Technology (MRVL), KLA Corp (KLAC), Lam Research (LRCX), and Microchip Technology (MCHP) closed up more than +1%.
Krispy Kreme (DNUT) closed up more than +7% after Piper Sandler upgraded the stock to overweight from neutral with a price target of $20.
Vertiv Holdings (VRT) closed up more than +5% after Oppenheimer initiated coverage on the stock with a recommendation of outperform and a price target of $96.
Shockwave Medical (SWAV) closed up more than +1% after Johnson & Johnson agreed to acquire the company for $13.1 billion of $335 a share.
Tesla (TSLA) closed down more than -3% to lead losers in the Nasdaq 100 after a Reuters report said the company had canceled its plans to build a low-cost entry-level Tesla car.
Paramount Global (PARA) closed down more than -3% after CNBC reported that Skydance Media will keep the company public and either own a substantial minority stake or a majority stake in the company by merging its assets and raising new equity.
Lamb Weston Holdings (LW) closed down more than -2% after Citigroup cut its price target on the stock to $106 from $132.
Intel (INTC) closed down more than -2% to lead losers in the Dow Jones Industrials and Nasdaq 100 on negative carryover from Wednesday when it gave a downbeat outlook for its factory operations.
Defensive packaged food producers moved lower Friday as the broader market rallied. As a result, Campbell Soup (CPB), Hormel Foods (HRL), J M Smucker (SJM), Hershey (HSY), and McCormick & Co (MKC) closed down more than -1%.
CCC Intelligent Solutions (CCCS) closed down more than -1% after announcing a proposed secondary offering of 20 million shares of its common stock.
Earnings Reports (4/8/2024)
Eagle Pharmaceuticals Inc/DE (EGRX) and Waldencast plc (WALD).
On the date of publication, Rich Asplund did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
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.
