Market Watch – August 10, 2018
Big Picture
By Bill Curry
S&P, Nasdaq Inch Toward Records; Canadian Markets Withstand Saudi Wrath
The S&P 500 and tech-heavy Nasdaq on Tuesday hit their second-highest close in history on the back of the high-flying technology sector, which has been at the nexus of a sharp recovery in U.S. stocks since a market swoon in February. Investor sentiment this week seems to have been buoyed by strong Q2 corporate earnings reports. With more than 85% of the companies in the S&P 500 having reported results, the firms have posted 24% growth in profits from a year earlier. Nevertheless, trade tensions between the U.S. and China continue to temper investor optimism. On Wednesday, Beijing warned that it would match the Trump administration step for step should it move ahead with new tariffs on Chinese imports. The Chinese economy faces strengthening headwinds from weakening consumption to slowed production and investment. The yuan has declined around 6% against the dollar in the past two months. In Canada, Saudi Arabia’s escalating efforts to make Canada pay for its criticisms of Saudi human rights have sent only a mild ripple through Canada’s markets, as the limited economic ties between the two nations are expected to limit the fallout from the diplomatic crisis. On Wednesday the Canadian dollar was briefly sent reeling by news reports that the Saudi government ordered its central bank and state pension funds to divest their Canadian stocks, bonds and cash holdings. The loonie, however, later bounced back to end the day up slightly against its U.S. counterpart. Why the Saudis have taken such a hard line against Canada’s criticism remains somewhat unclear. Turning to commodities, oil prices fell to their lowest level in nearly seven weeks Wednesday as total U.S. stockpiles of oil and fuel hit a seven-month high and U.S. – China trade tensions weighed on demand.