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The close: TSX notches biggest gain of 2023 as stocks rally on U.S. jobs data, debt default deal

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U.S. and Canadian stocks closed higher on Friday after a labour market report showing moderating wage growth in May indicated the Federal Reserve may skip a rate hike in two weeks, while investors welcomed a Washington deal that avoided a catastrophic debt default. It was the biggest gain in seven months for the TSX, with energy and financial shares among the biggest winners in a broad-based rally.

Bond yields spiked as a risk-on tone to markets had investors shunning the bond market.

The tech-heavy Nasdaq index surged to a 13-month intraday high and posted its sixth-straight week of gains that mark its best winning streak since January 2020.

U.S. job growth accelerated in May but a surge in the unemployment rate to a seven-month high of 3.7% as more people looked for employment indicated labour market conditions were easing.

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The jump in the unemployment rate from a 53-year low of 3.4% in April reflected a drop in household employment and a rise in the overall workforce. A bigger labour pool is easing pressure on businesses to raise wages and helping decelerate inflation.

Average hourly earnings climbed 0.3% after rising 0.4% in April. That lowered the year-on-year increase in wages to 4.3% after an advance of 4.4% in April. Annual wage growth averaged about 2.8% prior to the pandemic.

“While it appears to be a hot number on the actual number of people employed, the wage rate is not increasing as fast,” said Kim Forrest, chief investment officer at Bokeh Capital Partners in Pittsburgh. “That is a softening effect and is this the mythical soft landing? Looks like that.”

The data brought relief to investors who mostly expect the Fed to pause hiking rates at its policy meeting on June 13-14. It would be the first halt since the Fed started its aggressive anti-inflation policy tightening more than a year ago.

But some pointed to the much hotter-than-expected jobs data as a sign the Fed still has not yet tamed inflation.

“Our view is and has been that the market is completely wrong on assessing what the Federal Reserve is doing,” said Phil Orlando, chief equity strategist at Federated Hermes in New York.

“The market’s perception is that this economy was going to cool, inflation was going to collapse and the Fed was going to turn around and start cutting interest rates. That’s wrong.”

Fed funds futures showed a 66.6% probability that the Fed will hold rates steady in two weeks, down from 79.6% on Thursday, according to CME Group’s FedWatch Tool.

The yield on the 10-year U.S. Treasury climbed to 3.70% from 3.60% late Thursday. The two-year Treasury yield, which moves more on expectations for Fed action, jumped to 4.52% from 4.34%. Canadian bonds saw a similar jump in yields.

Markets now await data on key consumer prices a day before the Fed’s rate decision.

The Toronto Stock Exchange’s S&P/TSX composite index ended up 352.38 points, or 1.8%, at 20,024.63, its biggest advance since November 2022. For the week, it was up 0.5%.

“It is all these little factors that the market is holding on to, looking for any reason to be bullish and they’re finding it,” said Philip Petursson, chief investment strategist at IG Wealth Management. “It’s definitely risk-on today.”

The TSX energy sector rallied 2.8% as oil settled 2.3% higher at US$71.74 a barrel ahead of a meeting of OPEC and its allies this weekend.

Suncor Energy Inc was up 3.2% after the company told employees it plans to cut 1,500 jobs this year.

“It appears that some activist investors are trying to make Suncor more efficient over the long term by getting them to cut costs and that’s good to see for investors,” said Greg Taylor, chief investment officer at Purpose Investments.

Heavily-weighted financials rose 2.1% and industrials were up 2.2%.

The real estate sector also advanced 2.2% as data showed home prices in the Greater Toronto Area increased in May from April and sales rose sharply.

In contrast, shares of Canaccord Genuity Group Inc fell 6.8% after a management-led consortium said its C$1.13 billion take-private offer may not result in a deal.

In the U.S., the Senate passing a bill late on Thursday to lift the government’s US$31.4 trillion debt ceiling avoided what would have been a catastrophic, first-ever default.

Passage of the vote eased investor concerns as Wall Street’s fear gauge, the CBOE volatility index, fell to its lowest since November 2021, down 1.1 points at 14.6 points.

The Dow Jones Industrial Average rose 701.19 points, or 2.12%, to 33,762.76, the S&P 500 gained 61.35 points, or 1.45%, to 4,282.37 and the Nasdaq Composite added 139.78 points, or 1.07%, to 13,240.77.

Shares of Verizon Communications Inc, AT&T Inc and T-Mobile US Inc declined after a report said Amazon.com Inc was in talks with the U.S. telecoms to offer low-cost wireless services to its Prime members.

Verizon slid 3.2%, while AT&T and T-Mobile declined 3.8% and 5.6%, respectively; Amazon gained 1.2%.

All 11 S&P 500 sectors advanced, with the materials index leading, up 3.4%, and the consumer discretionary sector, housing Amazon, close behind, rising 2.2%.

Nvidia Corp slid 1.1% for a second day of declines after briefly entering on Wednesday the elite club of megacap stocks valued at $1 trillion or more on hopes artificial intelligence will deliver significant future returns.

But Nvidia’s almost 170% rise year to date highlights investors face of a market dominated by the out-performance of megacaps while most other companies tread water.

“Nobody’s really explained to me how they’re going to make any money from it,” said Michael Landsberg, chief investment officer at Landsberg Bennett Private Wealth Management in Punta Gorda, Florida. “A company like Nvidia going up so much in such a short period of time, that doesn’t make any rational sense.”

Advancing issues outnumbered declining ones on the NYSE by a 4.75-to-1 ratio; on Nasdaq, a 2.73-to-1 ratio favored advancers. The S&P 500 posted 15 new 52-week highs and two new lows; the Nasdaq Composite recorded 74 new highs and 40 new lows. Volume on U.S. exchanges was 11.05 billion shares, compared with about 10.58 billion average for the full session over the last 20 trading days.

Reuters, Globe staff

 

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Calgary breaks all-time record in housing starts but increasing demand keeps inventory low – CBC.ca

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Soaring housing demands in Calgary led to an all-time record for new residential builds last year, but inventory levels of completed and unsold units remained low due to demand outpacing supply.

According to the latest report from Canada Mortgage and Housing Corporation (CMHC), total housing starts increased by 13 per cent in Calgary, reaching a total of 19,579 units with growth across all dwelling types in the city.

That compares to a decline of 0.5 per cent overall for housing starts in the six major Canadian cities surveyed by CMHC.

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Calgary also had the highest housing starts by population.

“Part of the reason why we think that might have happened is that developers are responding to low vacancies in the rental market,” said Adebola Omosola, a housing economics specialist with CMHC.

“The population of Calgary is still growing, a record number of people moved here last year, and we still expect that to remain at least in the short term.”

Earlier this year, the Calgary Real Estate Board also predicted that demand, especially for rental apartments, wouldn’t let up any time soon. 

Industry can cope with demand, expert says

According to numbers from the report, average construction times were higher in 2023 for all dwelling types except for apartments.

The agency’s report suggests the increase in the number of under-construction residential projects might mean builders are operating at or near full capacity.

However, there’s optimism the construction industry can match the increasing need.

Brian Hahn, CEO of BILD Calgary Region, said despite concerns around about construction costs, project timelines and labour shortages, the industry has kept up with the demand for new builds.

Demand is expected to remain robust, but the construction industry can keep up, according to BILD Calgary region CEO Brian Hahn.
Demand is expected to remain robust, but the construction industry can keep up, according to BILD Calgary Region chief executive officer Brian Hahn. (Shaun Best/Reuters)

“I’ve heard that kind of conversation at the end of 2022 and I heard it in 2023,” Hahn said.

“Yet here we are early in 2024, and January and February were record numbers again.”

Hahn added he believes the current pace of construction will continue for at least the next six months and that the industry is looking at initiatives to attract more people to the trades.

Increase in row house and apartment construction

Construction growth was largely driven by new apartment projects, making up almost half of the housing starts in Calgary in 2023.

The federal housing agency says 9,034 apartment units were started that year, an increase of 17 per cent from the previous year. Of those, about 54 per cent were purpose-built rentals.

Apartments made up around two-thirds of all units under construction, CMHC said, with the total number of units under construction reaching 23,473.

Growth, however, was seen across all dwelling types. Row homes increased by 34 per cent from the previous year while groundbreaking on single-detached homes grew by two per cent.

“Notwithstanding challenges, our members and the industry counterparts that support them managed to produce a record amount of starts and completions,” Hahn said.

“I have little doubt that the industry will do their very best to keep pace at those levels.”

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Ottawa real estate: House starts down, apartments up in 2023 – CTV News Ottawa

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Rental housing dominated construction in Ottawa last year, according to a new report from the Canada Mortgage and Housing Corporation (CMHC).

Residential construction declined significantly in 2023, with housing starts dropping to 9,245 units, a 19.5 per cent decline from the record high observed in 2022. But while single-detached and row housing starts fell compared to 2022, new construction for rental units and condominiums rose.

“There’s been a shift toward rental construction over the past two years. Rental housing starts made up nearly one third of total starts in 2023, close to double the average of the previous five years,” the report stated.

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Apartment starts reached their highest level since the 1970s.

“The trend toward rental and condominium apartment construction follows increased demand in these market segments due to population growth, households looking for affordable options, and some seniors downsizing to smaller units,” the CMHC said.

Demand from international migration and students, the high cost of home ownership, and people moving to Ottawa from other parts of Ontario were the main drivers for rental housing starts in 2023. The CMHC says rental and condominium apartment starts made up 63 per cent of total starts in 2023, compared to the average of 37 per cent for the period 2018-2022.

There was a modest increase in rental housing starts in 2023 over the record-high seen the year prior and a jump in new condominiums. The report shows 5,846 new apartments were built in Ottawa last year, up 2.1 per cent compared to 2022.

Housing starts in Ottawa by year. (CMHC)

Big demand for condos

The CMHC said condo starts reached a new high in 2023, increasing 3 per cent from 2022 numbers.

“As of the end of 2023, there were only 13 completed and unsold condominium units, highlighting continued demand for new units,” the CMHC said.

Condominum starts increased in areas such as Chinatown, Hintonburg, Vanier and Alta Vista, as well as some suburban areas like Kanata, Stittsville, and western Orléans. Condo apartment construction declined in denser parts of the city like downtown, Lowertown and Centretown, the report says.

Taller buildings are also becoming more common, as the cranes dotting the skyline can attest. The CMHC notes that buildings with more than 20 storeys accounted for nearly 10 per cent of apartment structure starts in 2022 and 2023, compared to an average of 2 per cent over the 2017-2021 period. The number of units per building also rose 7 per cent compared to 2022.

Apartment building heights in Ottawa by year. (CMHC)

Single-detached home construction down significantly

The number of new single-detached homes built in Ottawa last year was the lowest level seen in the city since the mid 1990s, CMHC said.

“The Ottawa area experienced a slowdown in residential construction in 2023, driven by a significant decline in single-detached and row housing starts,” the CMHC said.

Single-detached housing starts were down 45 per cent compared to 2022. Row house starts dropped by 38 per cent compared to 2022, marking a third year of declines in a row.

“Demand for single-detached and row houses also declined in 2023. Higher mortgage rates and home prices have led to a shift in demand toward more affordable rental and condominium units,” the report said.

There were 1,535 single-detached housing starts in Ottawa last year, 208 new semi-detached homes and 1,678 new row houses.

The majority of single-detached and row housing starts were built in suburban communities such as Barrhaven, Stittsville, Kanata, Orléans and rural parts of the city.

“Increased construction costs resulting from higher financing rates and inflation that occurred in 2022 and 2023 contributed to the decline in construction in the region,” the CMHC said. 

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Trump’s media company ticker leads to fleeting windfall for some investors

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A man looks at a screen that displays trading information about shares of Truth Social and Trump Media & Technology Group, outside the Nasdaq Market site in New York City, U.S., March 26.Brendan McDermid/Reuters

Possible confusion over the new stock symbol for former President Donald Trump’s Truth Social (DJT-Q) saw some investor brokerage balances briefly jump by hundreds of thousands of dollars on Tuesday, the first day Trump’s “DJT” ticker traded.

Several people complained on social media about briefly seeing the value of their DJT stock holdings on Charles Schwab platforms inflated to figures more in line with what they would be worth if the shares traded at the level of the Dow Jones Transportation Average.

Some users said they faced a similar issue in pre-market hours on Morgan Stanley’s E*Trade trading platform.

Shares of Trump Media & Technology Group opened Tuesday at $70.90, while the Dow Jones Transportation Average started the session at 15,937.73 points.

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For one trader, the Schwab brokerage balance jumped by more than $1 million due to the error, according to a screen grab shared on social media platform X. Reuters was unable to contact the trader or independently verify the brokerage balance.

“It sure was nice seeing millions in the account, even if it wasn’t real,” another person, going by the username @DanielBenjamin8, who faced the issue in his E*Trade account, posted on X.

Two X users and one on Reddit surmised that the inflated balances were due to the ticker symbol for the company being nearly identical to the index.

A spokeswoman for Charles Schwab said that certain users on some of Schwab’s trading platforms saw their brokerage balances briefly inflated due to a technical issue.

The issue has been resolved and investors are able to trade equities and options on Schwab platforms, she said. Schwab declined to describe the exact cause of the issue.

E*Trade did not immediately respond to a request for comment outside of regular business hours.

Trump Media & Technology Group and S&P Dow Jones Indices, which maintains the Dow Jones Transportation Average Index, did not immediately comment on the issue.

While social media users said the issue appeared to have been resolved, many rued not being able to cash out their supposed gains from the error.

“I better go tell my boss that I’m actually not retiring,” the trader whose account balance had briefly jump by more than $1 million, wrote on X.

Trump Media & Technology Group shares surged more than 36% on Tuesday in their debut on the Nasdaq that comes more than two years since its merger with a blank-check firm was announced.

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