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Market Watch: November 26

Nov 26, 2021 | 2:03 PM

Big Picture

Rising Yields Weigh on Key Tech Names in Shortened Trading Week

It’s been a relatively quiet trading week with U.S. markets closed Thursday and a half day on Friday for the U.S. Thanksgiving holiday. However, markets received a jolt early Monday after it was reported that President Biden would nominate Jerome Powell for a second term as chairman of the Federal Reserve, ensuring a bit of continuity for the central bank as it battles inflation and the lingering effects of the pandemic. Although markets initially climbed in response to the news, the Nasdaq tumbled deep into negative territory by day’s end as climbing Treasury yields weighed on major growth stocks. The TSX also closed lower, with the tech sector surrendering significant ground.

The S&P 500 gained ground Tuesday as cyclical stocks helped overcome losses in technology shares. Bond yields continued to rise Tuesday, as 10-year U.S. Treasurys climbed to 1.66 per cent, up from 1.62 per cent Monday. The Nasdaq ended lower for a second straight session as rising yields prompted investors to unload key tech names. The TSX, however, snapped a four-day losing streak, thanks to the energy sector, which climbed nearly 4 per cent after a move by the U.S., China and other nations to tap emergency oil reserves.

There was a wide range of U.S. economic news to digest on Wednesday, some good, some not so good. On the positive side, household spending rose 1.3 per cent in October from a month earlier, while weekly jobless claims fell sharply to their lowest level in more than five decades. On the negative side, U.S. consumer sentiment fell to its lowest level in a decade, while one of the Fed’s favoured inflation gauges, the core personal-consumption expenditures price index, rose 4.1 per cent year over year, the most since 1991. By Wednesday’s close, the S&P 500, Nasdaq and TSX recorded modest gains, while the Dow finished flat for a second straight day.

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With U.S. markets closed Thursday, trading volume on the TSX was fairly light. However, the index recorded a modest gain, closing 65 points higher on strength in the tech and energy sectors.

U.S. Markets Mixed; TSX Up Slightly

For the four trading days covered in this report, the Dow added 202 points to close at 35,804, the S&P 500 inched up 3 points to settle at 4,701, while the tech-heavy Nasdaq lost 212 points to close at 15,845. In Canada, the TSX climbed 58 points to end at 21,613.

Strategy

Optimism for Canadian small businesses rose in November for a second consecutive month

The metric rose to 62.2 from October’s figure of 60.5, after experiencing a sharp decline in September, according to the Canadian Federation of Independent Business’s (CFIB) index, an indicator of business sentiment for the next 12 months. The short-term index, based on 3-month forward expectations, rose 4.3 points to 49.8, inching closer towards expansionary territory.

On a provincial basis, Quebec improved the most (+9 points short-term, +7 points long-term), followed by Ontario (+4.5 points short-term, +2 points long-term), while Newfoundland (-4.3 points short-term, -1.3 long-term) and Manitoba (-3.8 points short-term, -5.9 points long-term) fell behind.

On a sectoral basis, short-term confidence for the retail sector gained the most (+6.6 points) as the holiday shopping season is set to get underway and spur consumer spending, while hospitality (-4.3 points) was the biggest laggard.

Another indicator that measures future price increases rose to an all-time high of 4.3 per cent as supply constraints and input costs have led businesses to pass on higher prices to the end-user.

Meanwhile, planned wage increases also rose to a fresh high of 3.1 per cent as companies have raised compensation to hire and attract skilled labour.

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