Market Watch: Dec. 4

Speaking of records, the S&P and Nasdaq closed at record highs on Tuesday, largely over vaccine optimism and strong Chinese factory numbers, raising hopes for global growth. In Canada, the TSX also enjoyed a strong day, gaining more than 100 points, buoyed by the materials and financial sectors.

In loonie news, the Canadian dollar strengthened against the greenback Tuesday as Canadian data showed strong Q3 growth. After a rough second quarter, Canada’s economy grew by 40 per cent in Q3, as businesses and stores reopened after COVID lockdowns. The news was also good for Canadian manufacturing, which expanded for the fifth straight month in November, according to data from IHS Markit.

On Wednesday, U.S. stocks wobbled between gains and losses for much of the day’s trading. While all three major U.S. indexes faltered after the opening bell, improving prospects for a U.S. stimulus package helped the S&P and Dow to register nominal gains by late afternoon.

Turning to U.S. jobs data released Wednesday, private-sector job creation fell off in November with slightly more than 300,000 non-farm jobs added, short of analysts’ expectations.

In Thursday trading, the Dow and Nasdaq finished slightly higher after initial jobless claims for the previous week declined to 712,000, a hopeful sign for the U.S. labour market. By Thursday’s close, the Nasdaq added 28 points, while the TSX gained 40.

U.S. Markets Register Modest Gains; TSX Flat

For the four trading days covered in this report, the Dow added 59 points to close at 29,969, the S&P 500 rose 29 points to settle at 3,667, while the tech-heavy Nasdaq climbed 171 points to close at 12,377. In Canada, the TSX was flat, adding a single point to end at 17,398.

Strategy

Canadian economy marks slowest job growth since the recovery began

Recovery momentum in Canada’s labour market slowed again in November, posting the smallest monthly job gain in the last six months. The Canadian economy added 62.1k jobs last month, slightly less than the 83k observed last month but easily above consensus at 20k.

Encouragingly, the entirety of the job-growth came from full-time employment, which accelerated to 99.4k this month versus 69.1k in October. Part-time employment fell by 37.4k after registering growth of 14.5k last month.

The unemployment rate ticked to 0.4 percentage points to 8.5 per cent, though at least some of the decline is the result of the participation rate edging down to 65.1 er cent, from 65.2 er cent previously.

Interestingly, Statistics Canada conducted the Canadian Survey on Business Conditions to collect information on businesses’ expectations moving forward. Almost one-quarter of businesses in accommodation and food services (22.5%) expected to reduce their number of employees over the next three months, more than double the average across all businesses (10.4%). We would note that the survey was conducted from mid-September to mid-October and those figures likely understate operators’ intentions given the retightening of restrictions in November. Accordingly, we expect customer-facing sectors could face increased downside in future reports.

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Market Watch: Dec. 4

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