Market Watch: Sept. 18

Although N.A. markets started strong, stock gains slipped away late Wednesday–despite the Fed’s assurance it was ready to keep interest rates near zero for three more years. Fed Chair Jerome Powell went on to add that the U.S. economic outlook was “highly uncertain,” while stressing the need for additional fiscal support from Congress.

While the Dow held on to a small gain, all three other major N.A. indexes finished in the red. The TSX closed 136 points lower, even though oil prices jumped more than 4 per cent, following a reduction in U.S. crude inventories. In economic data released Wednesday, U.S. retail sales climbed just 0.6 per cent in August, prompting further concerns of a stalled recovery.

Conversely, data released this week showed Chinese industrial output jumped the most in eight months in August, up 5.6 per cent, while retail sales in China also grew for the first time this year, beating forecasts.

Lingering concerns over the Fed’s statement Wednesday weighed on markets again Thursday. Investor optimism also waned on news that U.S. jobless claims held nearly steady at 860,000 last week, dashing hopes for a speedy labour-market recovery. By Thursday’s close all four N.A. markets were in the red, with the Nasdaq losing 140 points.

N.A. Markets Record Slight Gains

For the four trading days covered in this report, the Dow added 234 points to close at 27,901, the S&P 500 was up 16 points to settle at 3,357, while the tech-heavy Nasdaq climbed 57 points to close at 10,910. In Canada, the TSX added 25 points to end at 16,247.

Strategy

Retail sales in Canada increased in July and are now above pre-pandemic level

Canadian retail sales rose 0.6 per cent in July, led by motor vehicle sales and gasoline stations. Core retail sales, which exclude these two subsectors, declined 1.2 per cent according to data released today from Statistics Canada.

Receipts were up in five provinces, and six of the eleven subsectors as regional lockdowns continued to be lifted. Demand from food and beverage stores continued to fall from its record high in March when consumers stockpiled supplies in response to the pandemic but remain above its pre-pandemic level.

After increasing four times in the past five months, sales at core retailers decreased by 1.2 per cent in July, led by sharply lower sales for building materials and garden equipment. Conversely, sales for clothing rose for the third straight month as more regions allowed shopping malls to re-open but remain below February levels.

E-commerce sales continued to grow to $2.8 billion in July and have increased by 63.2 per cent from the year prior. The share of retail e-commerce sales to total sales has decreased from April’s high, but continues to be well above year-ago levels.

From April’s record low, we have seen a V-shaped recovery in total retail sales however growth has predictably waned from the jump of 22.7 per cent in June. Today’s report, along with CPI data, confirms Canadian consumers continue to emerge from government-imposed lockdowns.

Millions of Canadians will be transitioned to Employment Insurance as the Canadian Emergency Response Benefit (CERB) is set to end on September 27. Without continued government support, we may see demand continue to decline.

Next week’s throne speech should provide additional insights on how Prime Minister Justin Trudeau and the Liberal government plan to tackle the challenges of the pandemic.

Disclaimer

This report is provided to you for informational purposes only and is not intended to provide personal investment advice. This report does not include or constitute an investment recommendation and does not take into account the particular investment objectives, financial conditions, or specific needs of individual clients. Any statements regarding future prospects may not be realized. Before acting on this material, you should consider whether it is suitable for your particular circumstances and talk to your investment advisor.

The author(s) of the report and the supervisors of the Global Portfolio Advisory Group may own securities of the companies included herein.

Scotia Capital Inc. is what is referred to as an “integrated” investment firm since we provide a broad range of corporate finance, investment banking, institutional trading and retail client services and products. As a result we recognize that there are inherent conflicts of interest in our business since we often represent both sides to a transaction, namely the buyer and the seller. While we have policies and procedures in place to manage these conflicts, we also disclose certain conflicts to you so that you are aware of them. Please note that we may have, from time to time, relationships with the companies that are discussed in this report.

The Global Portfolio Advisory Group prepared this report by analyzing information from various sources. Information obtained in the preparation of this report may have been obtained from the Equity Research and Fixed Income Research departments of the Global Banking and Markets division of Scotiabank. Information may be also obtained from the Foreign Exchange Research and Scotia Economics departments within Scotiabank. In addition to information obtained from members of the Scotiabank group, information may be obtained from the following third party sources: Standard & Poor’s, Morningstar, Bloomberg, Credit Suisse AG, Perimeter Markets Inc., and FactSet. The information and opinions contained in this report have been compiled or arrived at from sources believed reliable but no representation or warranty, express or implied, is made as to their accuracy or completeness.

While the information provided is believed to be accurate and reliable, neither Scotia Capital Inc., which includes the Global Portfolio Advisory Group, nor any of its affiliates makes any representations or warranties, express or implied, as to the accuracy or completeness of such information. Neither Scotia Capital Inc. nor its affiliates accepts any liability whatsoever for any direct or consequential loss arising from any use of this report or its contents.

Nothing contained in this report is or should be relied upon as a promise or representation as to the future. The pro forma and estimated financial information contained in this report, if any, is based on certain assumptions and analysis of information available at the time that this information was prepared, which assumptions and analysis may or may not be correct. There is no representation, warranty or other assurance that any projections contained in this report will be realized.

Opinions, estimates and projections contained herein are those of the Global Portfolio Advisory Group as of the date hereof and are subject to change without notice. For that reason, it cannot be guaranteed by The Bank of Nova Scotia or any of its subsidiaries, including Scotia Capital Inc. This report is not, and is not to be construed as: (i) an offer to sell or solicitation of an offer to buy securities and/or commodity futures contracts; (ii) an offer to transact business in any jurisdiction; or (iii) investment advice to any party. Products and services described herein are only available where they can be lawfully provided. Scotia Capital Inc. and its affiliates and/or their respective officers, directors or employees may from time to time acquire, hold or sell securities and/or commodities and/or commodity futures contracts mentioned herein as principal or agent.

Trademarks are the property of their respective owners.

This report is distributed by Scotia Capital Inc., a subsidiary of The Bank of Nova Scotia. Scotia Capital Inc. is a member of the Canadian Investor Protection Fund and the Investment Industry Regulatory Organization of Canada.

® Registered trademark of The Bank of Nova Scotia, used under licence. Scotia Wealth Management® consists of a range of financial services provided by The Bank of Nova Scotia (Scotiabank®); The Bank of Nova Scotia Trust Company (Scotiatrust®); Private Investment Counsel, a service of 1832 Asset Management L.P.; 1832 Asset Management U.S. Inc.; Scotia Wealth Insurance Services Inc.; and ScotiaMcLeod®, a division of Scotia Capital Inc. Private banking and International private banking services are provided in Canada by The Bank of Nova Scotia. Estate and trust services are provided by The Bank of Nova Scotia Trust Company. Portfolio management is provided by 1832 Asset Management L.P. and 1832 Asset Management U.S. Inc. Insurance services are provided by Scotia Wealth Management Insurance Services Inc. Wealth advisory and brokerage services are provided by ScotiaMcLeod, a division of Scotia Capital Inc. International investment advisory services are provided in Canada by Scotia Capital Inc. Financial planning services are provided by The Bank of Nova Scotia, 1832 Asset Management L.P., and ScotiaMcLeod, a division of Scotia Capital Inc. Scotia Capital Inc. is a member of the Canadian Investor Protection Fund and the Investment Industry Regulatory Organization of Canada. Scotia Wealth Insurance Services Inc. is the insurance subsidiary of Scotia Capital Inc., a member of the Scotiabank group of companies. When discussing life insurance products, ScotiaMcLeod advisors are acting as Life Insurance Agents (Financial Security Advisors in Quebec) representing Scotia Wealth Insurance Services Inc.

Scotia Wealth Management consists of a range of financial services provided, in The Bahamas, by Scotiabank (Bahamas) Limited and The Bank of Nova Scotia Trust Company (Bahamas) Limited. International private banking services are provided in The Bahamas by Scotiabank (Bahamas) Limited, an entity registered with The Central Bank of The Bahamas. International investment advisory services are provided in The Bahamas by Scotiabank (Bahamas) Limited, an entity registered with The Securities Commission of The Bahamas. International wealth structuring solutions are provided in The Bahamas by The Bank of Nova Scotia Trust Company (Bahamas) Limited, an entity registered with The Central Bank of The Bahamas.

Scotia Wealth Management consists of international investment advisory services provided, in Barbados, by The Bank of Nova Scotia, Barbados Branch, an entity licensed by the Barbados Financial Services Commission.

Scotia Wealth Management consists of a range of financial services provided, in the Cayman Islands, by Scotiabank & Trust (Cayman) Ltd. International private banking services, international investment advisory services and international wealth structuring solutions are provided in the Cayman Islands by Scotiabank & Trust (Cayman) Ltd., an entity licensed by the Cayman Islands Monetary Authority.

Scotia Wealth Management consists of international private banking services provided, in Peru, by Scotiabank Peru S.A.A, an entity supervised by the Peru Superintendence of Banking and Insurance.

by Scotia Wealth Management - The Zukiwsky Group

Market Watch: Sept. 18

What's Trending