Market Watch: Oct. 29

It was an even rougher day for the TSX on Wednesday as Canada’s main stock index fell 218 points — more than 1% — thanks falling oil prices and BoC comments. Meanwhile, after two days of record highs, the Dow and S&P 500 took a step back Wednesday, shedding 266 points and 23 points, respectively. In the U.S., new data revealed that durable goods orders fell 0.4% in September from August, the latest sign that the U.S. economy slowed in the third quarter. As expected on Wednesday, the Bank of Canada held its benchmark rate steady at 0.25% but noted that rates could be rising as soon as next spring. The bank also announced the end of its quantitative easing program and the start of its “reinvestment phase,” where it will purchase only enough bonds to replace existing holdings as they mature. North American markets turned in strong performances on Thursday, lifted by another round of solid earnings reports. By Thursday’s close, the Dow and TSX each added roughly 240 points, while S&P 500 and Nasdaq climbed 45 points and 212 points, respectively.

U.S. Markets Up, TSX Off Slightly

For the four trading days covered in this report, the Dow rose 53 points to close at 35,730, the S&P 500 added 51 points to settle at 4,596, while the tech-heavy Nasdaq jumped 358 points to close at 15,448. In Canada, the TSX slipped 19 points to end at 21,197.

Strategy

Canadian GDP stalls at the end of 3Q amid supply bottlenecks, as the retail sector faces challenges

Canadian economic output growth wobbled unexpected at the end of 3Q, casting doubt over the strength of the recovery. Statistics Canada said output expanded 0.4% in August, below the 0.7% estimate but up from July’s -0.1% reading and was “essentially unchanged” in September. September saw widespread increases in mining, quarrying, and oil and gas extraction, wholesale trade and transportation offset by significant drop in manufacturing due to lower sales in transportation equipment and a decline in retail trade. In August, gains were led by increases in accommodation and food services, retail trade and transportation. The continued easing of public health restrictions and further reopening across the country increased demand across many close contact service industries. Overall, 15 of 20 industrial sectors were up as growth in services-producing industries, +0.6%, more than offset a decline in goods-producing industries, -0.1%. The accommodation and food services sector rose 7.0% in August, continuing to recover some of the ground lost since the beginning of the pandemic. Food services and drinking places rose 5.4% in August, following an 8.1% increase in July. The ongoing economic reopening across the country, in the form of loosened public health restrictions on indoor and outdoor dining throughout the summer contributed positively to the third consecutive strong monthly gain. However, the subsector was approximately 15% below its pre-pandemic level of activity. Retail trade rose 1.8% in August, more than offsetting the 0.6% contraction in July, with 9 of 12 subsectors posting gains. Furniture and home furnishing stores, -2.3%, and motor vehicle and parts dealers, -0.4%, both contracted in August, in part due to global supply chain constraints.

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by Scotia Wealth Management - The Zukiwsky Group

Market Watch: Oct. 29

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