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U.S. stock melt-up drives S&P 500 to brink of bull run

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The relentless rally in big tech, options positioning and bets on a Federal Reserve pause following a mixed jobs report put stocks on the verge of a bull market.

An advance of roughly 1.5 per cent for the S&P 500 extended the benchmark’s surge from its October low to nearly 20 per cent. A gauge of megacaps like Tesla Inc. and Apple Inc. saw its sixth straight week of gains — the longest winning run in since July 2021. Broadcom Inc. climbed after predicting that sales tied to artificial intelligence will double this year.

As stocks rose, Wall Street’s “fear gauge” plummeted to pre-pandemic levels. The Cboe Volatility Index, or VIX, dropped below 15 from an average of 23 in the past year. The risk-taking mode also drove the Russell 2000 index of small caps — the home of several regional banks — up about 3.5 per cent

“The impressive run for equities continues to drive retail investors into the market,” said Mark Hackett, chief of investment research at Nationwide. “Investors have spent much of the past three years obsessed by the Fed, inflation, and payrolls, though volatility around those reports has settled, reflecting a less emotional market. This is bullish, as less reactivity is a sign of a healthy market.”

Options Positioning

To Andrew Brenner at NatAlliance Securities, the melt-up in equities has a lot to do with one thing: positioning.

“Options traders were off sides,” Brenner said. “We think they get back onsides next week, and the rally will run out of steam.”

Indeed, the stock advance doesn’t mean the market isn’t facing headwinds, according to Quincy Krosby, chief global strategist at LPL Financial.

Among the risks, she cites the potential ramifications of the deluge of Treasury notes — approximately US$1 trillion — to be auctioned as the US department replenishes its general account following a debt-limit deal. that could ignite a significant sapping of liquidity from financial markets, she noted.

“That the Fed has telegraphed that June 14 is off the table for a rate hike no doubt reflects its concerns regarding the potential for increased market volatility stemming from dissipating liquidity,” Krosby said. “Still, today’s across-the-board rally confirms that the market doesn’t see an impending recession despite the incessant calls for one.”

Signs of labor-market slackening in May despite a pickup in hiring could strengthen the argument from Fed Chair Jerome Powell and other officials that they should take more time to assess incoming data and the evolving outlook before raising rates again.

Wall Street’s reaction to the latest jobs report showed bets that another Fed hike is likely in the bag — but that wouldn’t necessarily happen in June.

Two-year yields, which are more sensitive to imminent central bank moves, jumped 16 basis points to 4.5 per cent.

Some 25 basis points of tightening were fully priced in across the next two meetings for part of the trading session Friday. Around 9 basis points was priced in for June, indicating a less than one-in-two chance of any hike being at this month’s meeting.

“The key question now is: can they wait until July or does this monster payrolls number trigger another burst of urgency?” said Seema Shah, chief global strategist at Principal Asset Management. “Perhaps the report details, with the unemployment rate rising and average hourly earnings growth slowing, tilts the decision to July.”

The Fed should be open to raising interest rates by a half percentage point in July if it opts to hold off from tightening this month, former Treasury Secretary Lawrence Summers said.

“We are again in a situation where the risks of overheating the economy are the primary risks that the Fed needs to be mindful of,” the Harvard University professor said in an interview with Bloomberg Television’s David Westin on Friday.

Some of the main moves in markets:

Stocks

  • The S&P 500 rose 1.4 per cent as of 4 p.m. New York time
  • The Nasdaq 100 rose 0.7 per cent
  • The Dow Jones Industrial Average rose 2.1 per cent
  • The MSCI World index rose 1.5 per cent

Currencies

  • The Bloomberg Dollar Spot Index rose 0.2 per cent
  • The euro fell 0.5 per cent to US$1.0708
  • The British pound fell 0.6 per cent to US$1.2450
  • The Japanese yen fell 0.8 per cent to 139.97 per dollar

Cryptocurrencies

  • Bitcoin rose 1.4 per cent to US$27,251.37
  • Ether rose 2.1 per cent to US$1,908.83

Bonds

  • The yield on 10-year Treasuries advanced 10 basis points to 3.69 per cent
  • Germany’s 10-year yield advanced six basis points to 2.31 per cent
  • Britain’s 10-year yield advanced four basis points to 4.16 per cent

Commodities

  • West Texas Intermediate crude rose 2.7 per cent to US$71.98 a barrel
  • Gold futures fell 1.5 per cent to US$1,965.20 an ounce

 

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Telus prioritizing ‘most important customers,’ avoiding ‘unprofitable’ offers: CFO

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Telus Corp. says it is avoiding offering “unprofitable” discounts as fierce competition in the Canadian telecommunications sector shows no sign of slowing down.

The company said Friday it had fewer net new customers during its third quarter compared with the same time last year, as it copes with increasingly “aggressive marketing and promotional pricing” that is prompting more customers to switch providers.

Telus said it added 347,000 net new customers, down around 14.5 per cent compared with last year. The figure includes 130,000 mobile phone subscribers and 34,000 internet customers, down 30,000 and 3,000, respectively, year-over-year.

The company reported its mobile phone churn rate — a metric measuring subscribers who cancelled their services — was 1.09 per cent in the third quarter, up from 1.03 per cent in the third quarter of 2023. That included a postpaid mobile phone churn rate of 0.90 per cent in its latest quarter.

Telus said its focus is on customer retention through its “industry-leading service and network quality, along with successful promotions and bundled offerings.”

“The customers we have are the most important customers we can get,” said chief financial officer Doug French in an interview.

“We’ve, again, just continued to focus on what matters most to our customers, from a product and customer service perspective, while not loading unprofitable customers.”

Meanwhile, Telus reported its net income attributable to common shares more than doubled during its third quarter.

The telecommunications company said it earned $280 million, up 105.9 per cent from the same three-month period in 2023. Earnings per diluted share for the quarter ended Sept. 30 was 19 cents compared with nine cents a year earlier.

It reported adjusted net income was $413 million, up 10.7 per cent year-over-year from $373 million in the same quarter last year. Operating revenue and other income for the quarter was $5.1 billion, up 1.8 per cent from the previous year.

Mobile phone average revenue per user was $58.85 in the third quarter, a decrease of $2.09 or 3.4 per cent from a year ago. Telus said the drop was attributable to customers signing up for base rate plans with lower prices, along with a decline in overage and roaming revenues.

It said customers are increasingly adopting unlimited data and Canada-U.S. plans which provide higher and more stable ARPU on a monthly basis.

“In a tough operating environment and relative to peers, we view Q3 results that were in line to slightly better than forecast as the best of the bunch,” said RBC analyst Drew McReynolds in a note.

Scotiabank analyst Maher Yaghi added that “the telecom industry in Canada remains very challenging for all players, however, Telus has been able to face these pressures” and still deliver growth.

The Big 3 telecom providers — which also include Rogers Communications Inc. and BCE Inc. — have frequently stressed that the market has grown more competitive in recent years, especially after the closing of Quebecor Inc.’s purchase of Freedom Mobile in April 2023.

Hailed as a fourth national carrier, Quebecor has invested in enhancements to Freedom’s network while offering more affordable plans as part of a set of commitments it was mandated by Ottawa to agree to.

The cost of telephone services in September was down eight per cent compared with a year earlier, according to Statistics Canada’s most recent inflation report last month.

“I think competition has been and continues to be, I’d say, quite intense in Canada, and we’ve obviously had to just manage our business the way we see fit,” said French.

Asked how long that environment could last, he said that’s out of Telus’ hands.

“What I can control, though, is how we go to market and how we lead with our products,” he said.

“I think the conditions within the market will have to adjust accordingly over time. We’ve continued to focus on digitization, continued to bring our cost structure down to compete, irrespective of the price and the current market conditions.”

Still, Canada’s telecom regulator continues to warn providers about customers facing more charges on their cellphone and internet bills.

On Tuesday, CRTC vice-president of consumer, analytics and strategy Scott Hutton called on providers to ensure they clearly inform their customers of charges such as early cancellation fees.

That followed statements from the regulator in recent weeks cautioning against rising international roaming fees and “surprise” price increases being found on their bills.

Hutton said the CRTC plans to launch public consultations in the coming weeks that will focus “on ensuring that information is clear and consistent, making it easier to compare offers and switch services or providers.”

“The CRTC is concerned with recent trends, which suggest that Canadians may not be benefiting from the full protections of our codes,” he said.

“We will continue to monitor developments and will take further action if our codes are not being followed.”

French said any initiative to boost transparency is a step in the right direction.

“I can’t say we are perfect across the board, but what I can say is we are absolutely taking it under consideration and trying to be the best at communicating with our customers,” he said.

“I think everyone looking in the mirror would say there’s room for improvement.”

This report by The Canadian Press was first published Nov. 8, 2024.

Companies in this story: (TSX:T)

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TC Energy cuts cost estimate for Southeast Gateway pipeline project in Mexico

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CALGARY – TC Energy Corp. has lowered the estimated cost of its Southeast Gateway pipeline project in Mexico.

It says it now expects the project to cost between US$3.9 billion and US$4.1 billion compared with its original estimate of US$4.5 billion.

The change came as the company reported a third-quarter profit attributable to common shareholders of C$1.46 billion or $1.40 per share compared with a loss of C$197 million or 19 cents per share in the same quarter last year.

Revenue for the quarter ended Sept. 30 totalled C$4.08 billion, up from C$3.94 billion in the third quarter of 2023.

TC Energy says its comparable earnings for its latest quarter amounted to C$1.03 per share compared with C$1.00 per share a year earlier.

The average analyst estimate had been for a profit of 95 cents per share, according to LSEG Data & Analytics.

This report by The Canadian Press was first published Nov. 7, 2024.

Companies in this story: (TSX:TRP)

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BCE reports Q3 loss on asset impairment charge, cuts revenue guidance

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BCE Inc. reported a loss in its latest quarter as it recorded $2.11 billion in asset impairment charges, mainly related to Bell Media’s TV and radio properties.

The company says its net loss attributable to common shareholders amounted to $1.24 billion or $1.36 per share for the quarter ended Sept. 30 compared with a profit of $640 million or 70 cents per share a year earlier.

On an adjusted basis, BCE says it earned 75 cents per share in its latest quarter compared with an adjusted profit of 81 cents per share in the same quarter last year.

“Bell’s results for the third quarter demonstrate that we are disciplined in our pursuit of profitable growth in an intensely competitive environment,” BCE chief executive Mirko Bibic said in a statement.

“Our focus this quarter, and throughout 2024, has been to attract higher-margin subscribers and reduce costs to help offset short-term revenue impacts from sustained competitive pricing pressures, slow economic growth and a media advertising market that is in transition.”

Operating revenue for the quarter totalled $5.97 billion, down from $6.08 billion in its third quarter of 2023.

BCE also said it now expects its revenue for 2024 to fall about 1.5 per cent compared with earlier guidance for an increase of zero to four per cent.

The company says the change comes as it faces lower-than-anticipated wireless product revenue and sustained pressure on wireless prices.

BCE added 33,111 net postpaid mobile phone subscribers, down 76.8 per cent from the same period last year, which was the company’s second-best performance on the metric since 2010.

It says the drop was driven by higher customer churn — a measure of subscribers who cancelled their service — amid greater competitive activity and promotional offer intensity. BCE’s monthly churn rate for the category was 1.28 per cent, up from 1.1 per cent during its previous third quarter.

The company also saw 11.6 per cent fewer gross subscriber activations “due to more targeted promotional offers and mobile device discounting compared to last year.”

Bell’s wireless mobile phone average revenue per user was $58.26, down 3.4 per cent from $60.28 in the third quarter of the prior year.

This report by The Canadian Press was first published Nov. 7, 2024.

Companies in this story: (TSX:BCE)

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