Market Watch: Nov. 19

In economic news, Canadian inflation rose in October to its quickest pace in nearly 19 years. According to Statistics Canada, the headline consumer price index rose 4.7 per cent in October year-over-year — the seventh straight month that inflation has exceeded the Bank of Canada’s target of 1-3 per cent. While prices rose in all eight major categories, consumers were hit especially hard at the gas pump. Meanwhile, the loonie on Wednesday sunk to its lowest level in nearly six weeks against the U.S. dollar as oil prices fell.

Despite strong earnings reports from key U.S. retailers, U.S. markets recorded moderate losses Wednesday as inflation concerns continue to weigh on sentiment. By the day’s close, the Dow dropped 211 points, while the S&P 500 and Nasdaq lost 12 and 52 points, respectively. In Canada, the TSX surrendered 64 points.

The U.S. Labor Department reported Thursday that initial jobless claims fell to a seasonally adjusted 268,000, the lowest level since the pandemic walloped the U.S. economy last spring.

It was a fairly quiet trading session on Thursday as North American markets finished somewhat mixed. The Dow and TSX recorded minor losses, while the S&P 500 and Nasdaq saw modest gains.

A Mixed Week for North American Markets For the four trading days covered in this report, the Dow dropped 229 points to close at 35,871, the S&P 500 added 21 points to settle at 4,704, while the tech-heavy Nasdaq climbed 133 points to close at 15,994. In Canada, the TSX lost 131 points to end at 21,673.

Strategy

Canadian retail sales fell by 0.6% to CA$56.6 billion in September

On a month-over-month (MoM) basis, down from August’s figure of 2.1 per cent, but beating consensus estimates which forecasted a drop of -1.7 per cent, according to data released by Statistics Canada. Excluding automotive sales, retail sales fell by -0.2 per cent compared to August’s uptick of 2.8 per cent and consensus projections of -1 per cent.

Sales for motor vehicles and parts (-1.6%) and new cars (-2.8%) were the primary factors dragging the headline figure down amidst widespread shortages for semi-conductors. Though September’s figures were in negative territory, overall sales for 3Q21 were up 2.7 per cent, the largest increase since 3Q20.

On a provincial basis, sales were up in all provinces except Ontario which recorded a drop of -4.4 per cent, while Quebec saw the largest gain at 2.0 per cent. Though elevated price pressures could weigh on consumer spending (October headline CPI was up 4.7% YoY), early indications of easing supply chain pressures and the holiday shopping season will likely act as important tailwinds that could lead to strong retail sales figures in the final months of the year. Indeed, advanced estimates from Statistics Canada suggest that sales bounced back in October and will record an increase of 1 per cent, though this figure is subject to revision.

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Market Watch: Nov. 19

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