Market Watch: Feb. 11, 2022

Pressure on tech shares eased a bit on Wednesday, as government bond yields fell 2 basis points to 1.94%. That was good news for the Nasdaq, which gained nearly 300 points by the session’s close. Meanwhile, the TSX climbed 227 points – its highest level in over two months – as optimism over easing pandemic restrictions boosted cyclical shares.

However, Wall Street’s main indexes fell at the open on Thursday after the U.S. Labor Department reported that headline consumer prices jumped 7.5% last month, the steepest year-over-year increase in four decades. The hot U.S. inflation data increases the Fed’s likelihood of aggressive rate hikes, beginning in March. In light of the high inflation numbers, U.S. 10-year Treasury yields hit 2.03% Thursday.

By Thursday’s close, the Nasdaq had dropped 305 points (or 2.1%), while the Dow and S&P 500 tumbled 526 and 83 points, respectively. In Canada, the TSX closed with a modest 72-point loss.

North American Markets Register Modest Gains

For the four trading days covered in this report, the Dow gained 151 points to close at 35,241, and the S&P 500 inched up 4 points to settle at 4,504, while the tech-heavy Nasdaq added 87 points to close at 14,185. In Canada, the TSX rose 260 points to end at 21,532.

Strategy

Global oil prices could climb further due to the OPEC+ coalition’s struggle to revive production

According to the International Energy Agency, unless the group’s Middle Eastern heavyweights pump extra to compensate, global oil prices could climb further because of the OPEC+ coalition’s struggle to revive production. Oil has rallied to a seven-year high above $90 a barrel as demand bounces back from the pandemic while supplies around the world lag behind. The 23-nation OPEC+ alliance has been struggling to restore the output halted. By the end of 2022, the shortfall between the amount of oil OPEC+ was supposed to have pumped and what it delivered since the start of 2021 could amount to 1 billion barrels. Rising prices have been an acute source of pain for major economies, fanning a surge in inflation and inflicting a cost-of-living crisis on millions. These risks could be reduced if the producers in the Middle East with spare capacity were to compensate for those running out. Saudi Arabia, OPEC’s de facto leader, holds the bulk of the group’s excess capacity. However, it has so far resisted the idea of tapping those reserves more quickly, contending that the individual quotas set by the OPEC+ agreement should be respected. Finally, the International Energy Agency forecasts still indicate that world oil markets will tip back into surplus for the rest of this year as supplies outside of OPEC+ pick up.

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.}

by Scotia Wealth Management - The Zukiwsky Group

Market Watch: Feb. 11, 2022

What's Trending