Wed, April 24, 2024 at 9:35 AM EDT
Business
We're #21! TSX rallies most since 2009 with second-quarter surge – BNN
What a difference three months makes. The S&P/TSX Composite Index surged 15.97 per cent in the second quarter after a disastrous start to the year, making Toronto’s benchmark stock exchange the 21st best performer among 92 global equity markets, sandwiched between the Euro Stoxx 50 and Ireland. It was the largest quarterly rally since mid-2009, when global markets were exiting the depths of the great financial crisis.
The strength exhibited by the TSX was widespread, with 10 of the 11 TSX subgroups capping off the quarter in positive territory, and 194 of the composite’s 222 individual constituents ending Q2 in the green.
In spite of the gains, the TSX remains 13.54 per cent below its all-time closing high of February 20th, 2020.
The monster rally wasn’t enough to keep pace with indices south of the border, with the S&P 500’s 19.95 per cent gain ranking it ninth in the world, and the Dow Jones Industrial Average’s 17.77 per cent gain placing it 11th. It was the strongest quarter for each index since 1998. Those returns, however, were dwarfed by Argentina’s Merval Index, which took the top spot with a 58.65 per cent gain.
Below, BNN Bloomberg takes stock of the quarter that was on the TSX.
Top Gainers:
Information Technology: +68.20 per cent
Materials: +41.56 per cent
Consumer Discretionary: +32.01 per cent
The information technology sector continued to be the star performer on the TSX for 2020 with a massive 68 per cent rally in Q2 after a largely flat performance to start the year. Canada’s latest tech darling Shopify Inc. led the way for the group, but the second quarter was far from a one-man show, with all 10 of the subgroup’s constituents finishing in positive territory.
The materials group tracked gold higher as the precious metal breached the US$1,800 mark for the first time since 2011, helping to drive the 41.56 per cent return. Precious metals miners dominated the upper ranks of lead gainers, with OceanaGold Corp., Alacer Gold Corp. and Pan American Silver Corp. all notching triple-digit gains. Though gold was grabbing the headlines through the quarter, base metals miners quietly posted stellar returns of their own, in part due to the nearly 22 per cent rally in the price of copper. In all, only two of the subgroup’s 51 members finished the quarter lower.
The TSX’s most motley group of companies posted the third-best performance of the quarter, with consumer discretionary gaining 32 per cent. The group, which includes autoparts makers, Tim Hortons’ parent company and a casino operator among its ranks, saw all 13 members end the quarter higher, led by recreational-vehicle manufacturer BRP Inc., toymaker Spin Master Corp. and Sleep Country Canada Holdings.
Top Gainers:
BRP Inc.: +152.18 per cent
OceanaGold Corp.: +134.07 per cent
MEG Energy: + 125.75 per cent
Cenovus Energy: + 123.59 per cent
Shopify Inc.: +118.75 per cent
Shares of BRP Inc. soared in the quarter, gaining more than 150 per cent amid rising demand for its side-by-side offroad vehicles. The company has seen a surge in interest in those offroad vehicles as Canadians are expected to eschew overseas vacations in favour of socially-distanced outdoor activities closer to home, including taking to the trails. In spite of the near-term demand, BRP is expecting revenue to fall as much as 20 per cent into the second half of the year.
OceanaGold Corp. was among the many beneficiaries of the rising price of gold, helping shares more than double through Q2. The company reported all-in sustaining cost per ounce of US$1,218 in its fiscal first quarter, well below the US$1,800 level gold is currently trading at. Oceana, which has operations in New Zealand, the Philippines and the United States, is forecasting higher production and lower all-in sustaining costs in the second half of the year.
The rebound in global oil prices lifted shares of MEG Energy and Cenovus through the second quarter, leading to a more than doubling in share prices of the companies. MEG, which is traditionally highly-sensitive to even modest fluctuations in the price of the underlying commodity, was a choppy ride for investors, regularly posting double-digit moves in a single day.
Tech darling Shopify rounded out the top five, posting a triple-digit return in a quarter that briefly saw it overtake Royal Bank of Canada as the largest publicly-traded company in Canada. The ecommerce platform provider has been seen as one of the winners from the pandemic-induced shutdown of swaths of the domestic economy and subsequent shift to more online shopping. Shopify also inked a deal with Walmart earlier in the Spring to help the big-box behemoth build out its third-party marketplace.
Worst performers:
Communications Services: -2.15 per cent
Utilities: +2.69 per cent
Financials: +4.85 per cent
Communications services was the only subgroup to finish the quarter in negative territory, posting a modest two per cent decline, though much of the blame can be pinned on a single stock: Cineplex Inc. The group, which is a relatively small slice of the overall index at 5.8 per cent, was nearly evenly split between winners and losers in the quarter, with three of its eight constituents finishing in positive territory.
The utilities group was essentially flat in Q2, garnering little in the way of investor interest. Many of the members of the group are highly regulated and carry long-term fixed contract rates, meaning short-term fluctuations in the underlying economic picture often have little impact on the rates they can charge customers.
The financials index rounded out the bottom three with a modest 4.8 per cent gain. Concerns over the near-term trajectory of domestic economic growth kept a lid on returns from the big banks, though all of the Big Five financial institutions save Bank of Nova Scotia finished in positive territory. Wealth management firm IGM Financial Inc., Toronto stock exchange operator TMX Group Ltd. and mortgage lender Home Capital Group Inc. were the top performers in the subgroup.
Top Losers:
Cineplex Inc.: -31.28 per cent
Sienna Senior Living Inc.: -24.43 per cent
Dream Office Real Estate Investment Trust: -12.08 per cent
Nutrien Ltd.: -9.33 per cent
Loblaw Companies Ltd.: -8.88 per cent
Allied Properties Real Estate Investment Trust: -8.45 per cent
The hits keep coming for Cineplex Inc. The nation’s dominant theatre operator was forced to shutter its theatres in the second quarter as health officials looked to stem the spread of the COVID-19 virus, leading to a plunge in revenue and a warning over its ability to continue as a going concern. The company also saw its $2.15-billion deal to sell itself to U.K.-based Cineworld Group PLC collapse after the British movie theatre operator claimed Cineplex breached the terms of the deal, helping to drive shares of Cineplex to an all-time low. The company is looking to reopen some theatres with social distancing rules in effect in the coming months, but may face a dearth of content to offer theatregoers as many film distribution houses have pushed out the timing of their blockbuster releases into the end of the year.
Sienna Senior Living Inc. was caught in the maelstrom of the COVID-19 virus, with the long-term care home operator being one of the hardest hit by the virus outbreak. The company operated one of the facilities where Canadian Armed Forces were sent to bolster care efforts for seniors in the depths of the crisis. Former President and Chief Executive Officer Lois Cormack abruptly resigned from her post on June 12th, and was replaced by the company’s CFO Nitin Jain.
Concerns over the long-term impact of the current work-from-home regime pressured shares of Dream Office REIT and Allied Properties in the second quarter. The office REIT sector has been dogged by questions over whether companies will return to their normal course of operations after a number of firms, including Shopify, declared that once the pandemic has passed they have no intention of returning to the status quo in terms of the number of workers in the office.
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Business
Oil Firms Doubtful Trans Mountain Pipeline Will Start Full Service by May 1st
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Oil companies planning to ship crude on the expanded Trans Mountain pipeline in Canada are concerned that the project may not begin full service on May 1 but they would be nevertheless obligated to pay tolls from that date.
In a letter to the Canada Energy Regulator (CER), Suncor Energy and other shippers including BP and Marathon Petroleum have expressed doubts that Trans Mountain will start full service on May 1, as previously communicated, Reuters reports.
Trans Mountain Corporation, the government-owned entity that completed the pipeline construction, told Reuters in an email that line fill on the expanded pipeline would be completed in early May.
After a series of delays, cost overruns, and legal challenges, the expanded Trans Mountain oil pipeline will open for business on May 1, the company said early this month.
“The Commencement Date for commercial operation of the expanded system will be May 1, 2024. Trans Mountain anticipates providing service for all contracted volumes in the month of May,” Trans Mountain Corporation said in early April.
The expanded pipeline will triple the capacity of the original pipeline to 890,000 barrels per day (bpd) from 300,000 bpd to carry crude from Alberta’s oil sands to British Columbia on the Pacific Coast.
The Federal Government of Canada bought the Trans Mountain Pipeline Expansion (TMX) from Kinder Morgan back in 2018, together with related pipeline and terminal assets. That cost the federal government $3.3 billion (C$4.5 billion) at the time. Since then, the costs for the expansion of the pipeline have quadrupled to nearly $23 billion (C$30.9 billion).
The expansion project has faced continuous delays over the years. In one of the latest roadblocks in December, the Canadian regulator denied a variance request from the project developer to move a small section of the pipeline due to challenging drilling conditions.
The company asked the regulator to reconsider its decision, and received on January 12 a conditional approval, avoiding what could have been another two-year delay to start-up.
Business
Tesla profits cut in half as demand falls
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Tesla profits slump by more than a half
Tesla has announced its profits fell sharply in the first three months of the year to $1.13bn (£910m), compared with $2.51bn in 2023.
It caps a difficult period for the electric vehicle (EV) maker, which – faced with falling sales – has announced thousands of job cuts.
Boss Elon Musk remains bullish about its prospects, telling investors the launch of new models would be brought forward.
Its share price has risen but analysts say it continues to face significant challenges, including from lower-cost rivals.
The company has suffered from falling demand and competition from cheaper Chinese imports which has led its stock price to collapse by 43% over 2024.
Figures for the first quarter of 2024 revealed revenues of $21.3bn, down on analysts’ predictions of just over $22bn.
But the decision by Tesla to bring forward the launch of new models from the second half of 2025 boosted its shares by nearly 12.5% in after-hours trading.
It did not reveal pricing details for the new vehicles.
However Mr Musk made clear he also grander ambitions, touting Tesla’s AI credentials and plans for self-driving vehicles – even going as far as to say considering it to be just a car company was the “wrong framework.”
“If somebody doesn’t believe Tesla is going to solve autonomy I think they should not be an investor,” he said.
Such sentiments have been questioned by analysts though, with Deutsche Bank saying driverless cars face “technological, regulatory and operational challenges.”
Some investors have called for the company to instead focus on releasing a lower price, mass-market EV.
However, Tesla has already been on a charm offensive, trying to win over new customers by dropping its prices in a series of markets in the face of falling sales.
It also said its situation was not unique.
“Global EV sales continue to be under pressure as many carmakers prioritize hybrids over EVs,” it said.
Despite plans to bring forward new models originally planned for next year the firm is cutting its workforce.
Tesla said it would lose 3,332 jobs in California and 2,688 positions in Texas, starting mid-June.
The cuts in Texas represent 12% of Tesla’s total workforce of almost 23,000 in the area where its gigafactory and headquarters are located.
However, Mr Musk sought to downplay the move.
“Tesla has now created over 30,000 manufacturing jobs in California!” he said in a post on his social media platform X, formerly Twitter, on Tuesday.
Another 285 jobs will be lost in New York.
Tesla’s total workforce stood at more than 140,000 late last year, up from around 100,000 at the end of 2021, according to the company’s filings with US regulators.
Musk’s salary
The car firm is also facing other issues, with a struggle over Mr Musk’s compensation still raging on.
On Wednesday, Tesla asked shareholders to vote for a proposal to accept Mr Musk’s compensation package – once valued at $56bn – which had been rejected by a Delaware judge.
The judge found Tesla’s directors had breached their fiduciary duty to the firm by awarding Mr Musk the pay-out.
Due to the fall in Tesla’s stock value, the compensation package is now estimated to be around $10bn less – but still greater than the GDP of many countries.
In addition, Tesla wants its shareholders to agree to the firm being moved from Delaware to Texas – which Mr Musk called for after the judge rejected his payday.
Business
Stock market today: Nasdaq futures pop, Tesla surges after earnings with more heavyweights on deck
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Tech stocks rose on Wednesday, outstripping the broader market as investors welcomed Tesla’s (TSLA) cheaper car pledge and waited for the next rush of corporate earnings.
The Nasdaq Composite (^IXIC) rose roughly 0.6%, coming off a sharp closing gain. The S&P 500 (^GSPC) was up 0.2%, continuing a rebound from its longest losing streak of 2024, while the Dow Jones Industrial Average (^DJI) fell 0.1%.
Tesla shares jumped nearly 12% after the EV maker’s vow to speed up the launch of more affordable models eclipsed its quarterly earnings and revenue miss. That cheered up investors worried about growth amid a strategy shift to robotaxis and the planned cancellation of a cheaper model.
The results from the first “Magnificent Seven” to report have intensified the already high hopes for Big Tech earnings, that the megacaps can revive the rally in stocks they powered. The spotlight is now on Meta’s (META) report due after the market close, as the Facebook owner’s shares rose after the Senate voted for a potential ban on rival TikTok. Microsoft (MSFT) and Alphabet (GOOG) next up on Thursday.
Meanwhile, Boeing (BA) reported better than expected first quarter results before the opening bell with a loss per share of $1.13, narrower than the $1.72 estimated by Wall Street. Shares rose about 2% in morning trade.
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