Market Watch: May 6, 2022

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North American markets ended mixed in choppy trading Wednesday, with the Dow, S&P 500 and TSX clawing back minimal gains after Tuesday’s selloff. The Nasdaq finished flat, dropping 2 points. In currency news, the loonie on Wednesday hit its lowest level in more than six weeks against the greenback (US77.88 cents), as investors parsed data on weakening global growth. According to the U.S. Commerce Department on Thursday, U.S. GDP shrank at a 1.4 per cent annual rate in Q1 as supply disruptions and a widening trade deficit weighed on the economy.

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Thursday’s Q1 numbers marked a sharp reversal from a 6.9 per cent annual growth rate in Q4. Finally, it was a strong day for Wall Street indexes on Thursday as beaten-down tech stocks regained significant ground after strong earnings reported by Facebook owner, Meta. By the day’s close, the Dow was up 614 points, the S&P 500 climbed 103, and the Nasdaq surged 382 points, or 3.06 per cent. In Canada, the TSX added 377 points.

U.S. Markets Up Slightly After Strong Thursday; TSX Surrenders Ground

For the four trading days covered in this report, the Dow rose 105 points to close at 33,916, the S&P 500 added 15 points to settle at 4,287, while the tech-heavy Nasdaq was up 32 points to close at 12,871. In Canada, the TSX lost 65 points to end at 21,121.

Strategy

Canadian small business confidence was virtually unchanged in April

The Canadian Federation for Independent Business (CFIB)’s Business Barometer short-term index, based on 3- month forward expectations for business performance, sat at 60.8, a monthly gain of +0.7. The long-term optimism index, which is based on a 12-month outlook, registered 64.9, a monthly decline of -0.4. Measured on a scale between 0 and 100, an index above 50 means owners expecting their business’s performance to be stronger over the next three or 12 months outnumber those expecting weaker performance. An index level near 65 normally indicates that the economy is growing at its potential. Business operating in the hospitality sector enjoyed the strongest boost in optimism (16 points) due to seasonal factors and looser travel restrictions. Optimism in other sectors that have been significantly affected by the pandemic, such as information and recreation, and personal services, is also improving.

Inflationary pressures, supply chain difficulties, and labour shortages continue to reach new highs in April. Indeed, shortages of skilled and semi-/unskilled labour are very significant. Nearly half of firms responding to the survey reported labour shortages as their main limitation to increasing sales.

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