Market Watch: July 24

Vaccine news once again lifted U.S. stocks on Wednesday as the U.S. government announced a nearly $2-billion deal with Pfizer to secure 600 million doses of its experimental Covid-19 vaccine. The good news was partially offset by reports that a new U.S. fiscal stimulus bill was unlikely to be hammered out this week. By Wednesday’s close, all four major N.A. indexes were in positive territory, with the Dow up 165 points.

U.S. stocks opened lower on Thursday in response to the latest numbers on new U.S. jobless claims, which rose last week for the first time in nearly four months to 1.4 million, a likely indicator that rising coronavirus infections are stalling a recovery in the U.S. labour market. Meanwhile gold prices were back in the news Thursday, closing just below a record high as global investors continue to flock to the safe-haven asset as the U.S. surpasses the 4-million mark for known infections.

N.A. Markets Mixed After Rough Thursday

For the four days covered in this report, the Dow dropped 20 points to close at 26,652, the S&P 500 rose 11 points to settle at 3,236, while the tech-heavy Nasdaq surrendered 42 points to close at 10,461. In Canada, the TSX declined 104 points to end at 16,019.

Strategy

Canada retail sales post strong recovery in May, June’s flash estimate promising further improvement

Retail sales in Canada posted a very strong month in May, as all provinces marked significant improvement during the month and alongside all major sectors, save for food and beverage stores that had gained earlier on pandemic spending. Receipts rose 19% in May, according to data published by Statistics Canada and June looks to have recorded another strong gain, with a flash estimate predicting another 25% increase. Ontario lagged the overall recovery given later easing of containment measures, though we expect it to lead the expansion in June and July figures, similar to what was observed in recent labour market reports. This is even more true when looking at the city level data. Toronto was held back from advancing to the third stage of reopening and will likely impede growth in the July report. E-commerce sales were $3.85 billion in May, up 112.7% from a year earlier and represented ~8% of total retail sales.

The report confirms Canadian consumers are emerging from nationwide lockdowns with pent up demand and keen to spend. At issue is whether the sharp rebound will be sustained into the second half of the year and to what extent will a resurgence of COVID-19 cases and slower reopening timelines affect outlooks. For their part, the Bank of Canada broke from its previous tradition and indicated it would leave its policy rate at its current level. 0.25%, until the Governing Council was certain the economy had weathered the effects from the health crisis, newly reintroduced economic slack was worked off, and the bank’s 2% inflation target was sustainably achieved.

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Market Watch: July 24

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