By Scotia Wealth Management - The Zukiwsky Group

Sponsored

Market Watch: June 10

Jun 10, 2022 | 3:28 PM

Big Picture

Markets In Wait-and-See Mode, as Investors Look to Friday’s U.S. Inflation Data

U.S. equity markets inched higher Monday as investors continue to parse jobs and inflation data ahead of Friday’s much-anticipated U.S. inflation report. By Monday’s close, the Dow added 16 points, while the S&P 500 and Nasdaq rose 13 and 49 points, respectively. In Canada, the TSX climbed 28 points, while Canadian bond yields hit their highest level in more than three years as inflation worries continue to mount.

It was a volatile session Tuesday for U.S. markets, which opened lower following a stark profit warning from giant retailer Target, citing growing inventories and reduced consumer demand. Despite the downbeat retail news, all three U.S. indexes secured modest gains by day’s end, with the Dow adding 264 points, while the S&P 500 and Nasdaq climbed 39 and 114, respectively. Meanwhile Canada’s main index added 109 points, buoyed by strength in the energy sector.

In Wednesday trading, all three major U.S. indexes essentially surrendered Tuesday’s gains, as investors anxiously await Friday’s Consumer Price Index data from the U.S. In Canada, the TSX dropped 136 points, led by declines in health care and industrials. Meanwhile the Organization for Economic Cooperation and Development (OECD) slashed its global growth outlook to 3 per cent for 2022, down from December’s forecast of 4.5 per cent.

Last seen March 10

Missing: Denzel Louis-Smallboy, 16, of Red Deer

10h ago

election yet to be called

Conservative Party, People's Party choose candidates for new federal Red Deer riding

19h ago

local man seeking to prevent closure

Judge's decision pending in overdose prevention site injunction case

Mar 15, 2025

On Thursday, the European Central Bank mapped out its plans to hike interest rates for the first time in more than a decade, as the central bank looks to fight rising inflation in Europe. In response to the announcement, indexes in North America opened lower and fell sharply in late trading. By Thursday’s close, the Dow fell 638 points, while the S&P 500 and Nasdaq plunged 98 and 332 points, respectively. In Canada, the TSX dropped 228 points, weighed down by health care and energy shares.

Finally, according to a Reuters poll, economists surveyed expect inflation to have held steady at 8.3 per cent in May. The official CPI report is scheduled to be released Friday morning.

Markets Lose Ground

For the four trading days covered in this report, the Dow lost 627 points to close at 32,273, the S&P 500 dropped 90 points to settle at 4,018, while the tech-heavy Nasdaq sunk 259 points to close at 11,754. In Canada, the TSX lost 227 points to end at 20,564.

Strategy

U.S. inflation hit a fresh 40-year high in May

U.S. inflation hit a fresh 40-year high in May as broad-based pressures continue to push overall prices higher. The CPI unexpectedly accelerated to 8.6 per cent on a year-over-year basis in May, printing ahead of consensus expectations for a gain of 8.3 per cent and up from April’s reading of 8.3 per cent.

Record gasoline prices, paired with unrelenting food and shelter costs, are exerting strong pressure on Americans’ cost of living, suggesting the U.S. Federal Reserve will likely continue its path of 50bps rate hikes through the summer and perhaps into the fall. Energy prices climbed 34.6 per cent from a year earlier, the most since 2005, including a nearly 49 per cent jump in gasoline costs. Gas prices so far in June have climbed to new highs, signaling more upward pressure in coming CPI reports and therefore keeping the Fed on its current path.

Grocery prices rose 11.9 per cent annually, the most since 1979, while electricity increased 12 per cent, the most since August 2006. Rent of primary of residence climbed 5.2 per cent from a year earlier, the most since 1987. Airfares rose 12.6 per cent in May, a slight moderation from the prior month but still up the most on an annual basis since 1980. Prices for hotel stays, meanwhile, were up 22.2 per cent year-over-year. Used car prices, which had been cooling in recent months, advanced 1.8 per cent in May, the most this year. New vehicle prices climbed 1 per cent.

Next Wednesday’s policy decision is accompanied by fresh summary economic projections and a new Dot Plot. Growth may be revised lower but the group’s inflation forecast will very likely be raised and we think it is possible for the Dot Plot to show a higher terminal policy rate for this cycle. While a 75bps hike is possible, we think it is unlikely given how much guidance has been issued from Fed members for 50bps hikes in June and July.

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.

Copyright 2022 Scotia Capital Inc. All rights reserved.

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.

For local news delivered daily to your email inbox, subscribe for free to the rdnewsNOW newsletter here. You can also download the rdnewsNOW mobile app in the Google Play and the Apple App Stores.