By Scotia Wealth Management (The Zukiwsky Group)

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Market Watch: April 12, 2019

Apr 12, 2019 | 2:16 PM

Big Picture

Markets in Wait-and-See Mode Ahead of Quarterly Earnings Results

The Dow and S&P drifted slightly lower Thursday, as traders have gone into a holding pattern in anticipation of quarterly earnings results set to arrive this Friday morning. Many traders have noted minor worries over the coming earnings season, as several notable companies have lowered their Q1 profit forecasts. Trading activity has also slowed in recent weeks as many investors have turned more cautious before they see the latest figures. On Wednesday, trading volume reached a new low for 2019, with many investors on the sidelines.

On Wednesday, data showed U.S. consumer prices in March posted their biggest increase since October, but underlying inflation remained a minor concern, given the backdrop of slowing global growth. Fed minutes from a March 19-20 meeting revealed that policymakers will exercise patience in hiking rates, leaving many economists to believe that the Fed could hold off on hikes through 2021.

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While North American markets were relatively quiet on Wednesday, equity markets declined on Tuesday after the U.S. threatened to place tariffs on European goods and fears of a global economic slowdown resurfaced as the IMF cut its global economic growth forecasts for 2019. Canada’s main stock index bounced back on Wednesday, led by gains in energy after oil prices rallied more than 1% as sanctions and blackouts in Venezuela helped tighten global supplies.

In Europe, the ECB left its policy stance unchanged but warned that economic risks remained. ECB President Mario Draghi confirmed policymakers were considering the effect of the central bank’s negative deposit rates and whether further action is needed to ease downward pressure on some European banks. Finally, EU leaders have agreed to delay Britain’s departure from the bloc until Oct. 31, giving Prime Minister Theresa May some much-needed time to win approval for her Brexit deal.

Markets

Dow Down, Other Markets Flat

For the four days covered in this report, the Dow shed 282 points to close at 26,143, the S&P 500 dropped 5 points to settle at 2,888, while the tech-heavy Nasdaq added 8 points to close at 7,947. In Canada, the TSX was relatively flat, up 3 points to end at 16,399.

Equities/Strategy

Strategy

IMF lowers global growth outlook. The International Monetary Fund (IMF) released its World Economic Outlook report earlier this week and downgraded its growth expectations for 2019 to 3.3% from 3.5% previously. The scope of downgrades was widespread as the IMF expects a slowdown in growth for ~70% of the global economy. The IMF cited trade tensions, policy uncertainty, and tighter financial conditions among the catalysts for the downgrade. Despite lowering growth estimates for 2019, the IMF left its forecast for 2020 unchanged as improving global conditions from a finalized U.S.-China trade agreement, stimulus tailwinds, Brexit resolution, and reflating growth and inflation expectations drive global growth of 3.6%.

(Bill Curry)