US equities started the month lower after a strong set of data suggested the Federal Reserve has not yet slowed growth enough to tamp down inflation, while JPMorgan Chase & Co.’s Jamie Dimon warned restrictive policies threaten to tip the economy into recession.
The S&P 500 fell 0.8 per cent as data showed an unexpected advance in US manufacturing activity as well as exceptionally high job openings, fueling concern the Fed will need to get more restrictive to slow runaway price gains. Financial firms in the index slid 1.7 per cent after Dimon said private borrowers may be stranded as conditions tighten.
The yield on 10-year Treasuries spiked higher as traders raised bets on the path for rate hikes. Oil rose ahead of an OPEC+ meeting to discuss supply policy. And tech shares outperformed, led by a 10 per cent surge in Salesforce Inc. The business-software giant jumped the most in nearly two years after raising its forecast in a sign demand remains robust.
The strong data landed in a market where investors are on edge over whether the Fed’s tighter policies will induce a recession, a sentiment underscored by Dimon’s comments. The central bank has twice raised rates since March and signaled it will enact two additional 50 basis-point increases at its next meetings.
While some economic data have started to slow, according to the Fed’s Biege Book, others remain robust enough that investors now see the chances growing for a third 50-point increase. St. Louis Fed President James Bullard urged policy makers on Wednesday to raise interest rates aggressively followed by cuts later.
“We now find ourselves in a little bit more no man’s land,” Greg Boutle, US head of equity and derivative strategy at BNP Paribas, said on Bloomberg TV. “We are in this kind of a bear market environment yet we haven’t seen recession manifest in a macro data yet. So we still think there is a path for the US economy to have a soft rather than a hard landing.”
Citigroup Inc. strategists said that after a difficult first five months of 2022, the pain may not be over yet for global equity markets. The prospect of downward revisions to earnings estimates is the latest headwind to face stock investors, already rattled by runaway inflation and the potential impact of central-bank tightening aimed at controlling it, the strategists led by Jamie Fahy wrote in a note.
Among individual stock moves, ChargePoint Holdings Inc. slipped as analysts noted that the EV charging network firm’s margins came under pressure due to rising costs and supply-chain disruption. Delta Air Lines Inc. also fell after raising its revenue outlook but warned it likely won’t grow capacity through the year’s end.
Europe’s Stoxx 600 Index extended declines in the wake of euro-zone figures Tuesday that showed a record jump in consumer prices, strengthening the case for the European Central Bank to lift interest rates. Meanwhile, in the US, Treasury Secretary Janet Yellen gave her most direct admission yet that she made an incorrect call last year in predicting that elevated inflation wouldn’t pose a continuing problem.
“Big picture, the market has priced in an economic slowdown but not a recession,” Ned Davis Research strategists Ed Clissold and Thanh Nguyen said in a note. “The timing and magnitude of any Fed pivot is the biggest factor in determining whether the rally can continue deep into the second half of the year. Another hurdle for the market is that earnings estimates appear vulnerable to further downward revisions.”
Here are some key events to watch this week:
Cleveland Fed President Loretta Mester discusses the economic outlook Thursday
US May employment report Friday
The UN’s Food and Agriculture Organization releases its monthly food price index at a time of maximum concern about global supplies on Friday
Some of the main moves in markets:
Stocks
The S&P 500 fell 0.7 per cent as of 4:01 p.m. New York time
The Nasdaq 100 fell 0.7 per cent
The Dow Jones Industrial Average fell 0.5 per cent
The MSCI World index fell 0.8 per cent
Currencies
The Bloomberg Dollar Spot Index rose 0.6 per cent
The euro fell 0.7 per cent to US$1.0654
The British pound fell 0.9 per cent to US$1.2485
The Japanese yen fell 1.2 per cent to 130.18 per dollar
Bonds
The yield on 10-year Treasuries advanced eight basis points to 2.93 per cent
Germany’s 10-year yield advanced six basis points to 1.19 per cent
Britain’s 10-year yield advanced five basis points to 2.16 per cent
Commodities
West Texas Intermediate crude rose 0.2 per cent to US$114.95 a barrel
Gold futures rose 0.1 per cent to US$1,850.60 an ounce
OTTAWA – The parliamentary budget officer says the federal government likely failed to keep its deficit below its promised $40 billion cap in the last fiscal year.
However the PBO also projects in its latest economic and fiscal outlook today that weak economic growth this year will begin to rebound in 2025.
The budget watchdog estimates in its report that the federal government posted a $46.8 billion deficit for the 2023-24 fiscal year.
Finance Minister Chrystia Freeland pledged a year ago to keep the deficit capped at $40 billion and in her spring budget said the deficit for 2023-24 stayed in line with that promise.
The final tally of the last year’s deficit will be confirmed when the government publishes its annual public accounts report this fall.
The PBO says economic growth will remain tepid this year but will rebound in 2025 as the Bank of Canada’s interest rate cuts stimulate spending and business investment.
This report by The Canadian Press was first published Oct. 17, 2024.
OTTAWA – Statistics Canada says the level of food insecurity increased in 2022 as inflation hit peak levels.
In a report using data from the Canadian community health survey, the agency says 15.6 per cent of households experienced some level of food insecurity in 2022 after being relatively stable from 2017 to 2021.
The reading was up from 9.6 per cent in 2017 and 11.6 per cent in 2018.
Statistics Canada says the prevalence of household food insecurity was slightly lower and stable during the pandemic years as it fell to 8.5 per cent in the fall of 2020 and 9.1 per cent in 2021.
In addition to an increase in the prevalence of food insecurity in 2022, the agency says there was an increase in the severity as more households reported moderate or severe food insecurity.
It also noted an increase in the number of Canadians living in moderately or severely food insecure households was also seen in the Canadian income survey data collected in the first half of 2023.
This report by The Canadian Press was first published Oct 16, 2024.
OTTAWA – Statistics Canada says manufacturing sales in August fell to their lowest level since January 2022 as sales in the primary metal and petroleum and coal product subsectors fell.
The agency says manufacturing sales fell 1.3 per cent to $69.4 billion in August, after rising 1.1 per cent in July.
The drop came as sales in the primary metal subsector dropped 6.4 per cent to $5.3 billion in August, on lower prices and lower volumes.
Sales in the petroleum and coal product subsector fell 3.7 per cent to $7.8 billion in August on lower prices.
Meanwhile, sales of aerospace products and parts rose 7.3 per cent to $2.7 billion in August and wood product sales increased 3.8 per cent to $3.1 billion.
Overall manufacturing sales in constant dollars fell 0.8 per cent in August.
This report by The Canadian Press was first published Oct. 16, 2024.
