MARKET WATCH: Feb. 19, 2021

Falling technology shares dragged down markets once again Thursday, along with a downbeat U.S. jobs report showing that new jobless claims rose last week to more than 860,000. Although the U.S. labour market continues to struggle, U.S. retail sales jumped 5.3% in January from the previous month.

In Canada, the jobs picture was also dour, as Canada lost more than 230,000 jobs in January, the largest loss since last May. By Thursday’s close, there were red numbers all around. The Dow was off by 120 points, with the S&P and Nasdaq dropping 17 and 100, respectively. In Canada, the TSX surrendered 100 points.

Finally, U.S. bond yields continue to rise, hitting 1.31% this week – levels not seen since before the pandemic began.

Dow Up Slightly, Remaining Indexes Drift Lower

For the three trading days covered in this report, the Dow added 35 points to close at 31,493, the S&P 500 shed 21 points to settle at 3,914, while the tech-heavy Nasdaq declined 230 points to close at 13,865. In Canada, the TSX lost 186 points to end at 18,274.

Strategy

Canadian retail sales fell by more than expected in December

Due to lockdown measures across the country which limited shopping, retail receipts fell 3.4% in the final month of 2020, easily surpassing the -2.6% decline predicted by market analysts, and preliminary guidance from Statistics Canada shows sales were down a further -3.3% in January, dropping the category below its pre-pandemic levels again.

Retail transactions rebounded relatively quickly last year after their initial decline in April and held up well over the course of the year. E-commerce sales were up 43.5% year-over-year and included in the report with a 7.8 % weight in total retail sales. Recall, the issue here is that they do not capture online orders from outside the country.

Given the weak start to the year and restrictions dragging into February, we expect receipts to rebound beginning in March and build momentum through the spring amid reopening and widespread vaccination.

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by Scotia Wealth Management - The Zukiwsky Group

MARKET WATCH: Feb. 19, 2021

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