Market Watch: August 19, 2022

There were red numbers all around on Wednesday in volatile trading as investors parsed the Fed’s comments concerning its next move in September. U.S. equity markets were down for much of the day but pared losses after investors detected a slightly dovish tone from the Fed’s July minutes. By the session’s end, the Nasdaq shed 164 points, while the Dow and S&P 500 dropped 172 and 31 points, respectively. Meanwhile, the TSX dropped 86 points, with tech and materials weakness offset by a rebound in oil prices.

The TSX turned in a strong performance Thursday, adding 84 points, as rising commodity prices helped the energy and materials sectors to solid gains. Meanwhile, U.S. equity markets finished slightly higher Thursday after a mixed session in which U.S. investors mulled over cooling U.S. home sales, fresh earnings reports and jobs data showing that unemployment inched down slightly. By Thursday’s close, all three major U.S. recorded slight gains.

Mixed Week for Wall Street; TSX Gains Ground

For the four trading days covered in this report, the Dow added 238 points to close at 33,999, the S&P 500 inched up 4 points to settle at 4,284, while the tech-heavy Nasdaq lost 82 points to close at 12,965. In Canada, the TSX rose 85 points to end at 20,265.

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Headline inflation in Canada shows signs of peaking, but price pressures remain broad-based

Lower gas prices drove the bulk of the deceleration in headline CPI – Canada’s headline consumer price index (CPI) moderated to 7.6 per cent year-over-year (YoY) in July from June’s figure of 8.1 per cent, in line with consensus expectations, according to data released by Statistics Canada. Like its southern neighbour, which reported inflation data last week, the deceleration was mainly due to lower gas prices which declined to 35.6 per cent YoY from 54.6 per cent in June. Excluding gasoline, prices were up 6.6 per cent YoY, slightly higher than June’s increase of 6.5 per cent. On a month-over-month basis (MoM), headline inflation rose 0.1 per cent (0.7 per cent previously), the smallest gain since December 2021. Consumers paid about 9.2 pe cent less for gasoline than in June, but food prices rose 0.9 per cent.

Other categories that cast upward pressure on costs included shelter (+0.4 per cent), health/personal care (+0.6 per cent), recreation/education (+1.4 per cent), and alcohol and tobacco (+0.5 per cent). Meanwhile, the cost of clothing (-1.7 per cent) and transportation (-1.2 per cent) moderated from last month. Excluding food and energy, inflation rose 0.6 per cent MoM and 5.5 pre cent YoY. Overall, services inflation was up 0.9 per cent MoM (5.7 per cent YoY), and goods prices declined by 0.6 per cent MoM but were up 9.6 per cent compared to the same period last year.

Finally, the average of the three core measures – common, median, and trim – rose to its highest level since 1990 to 5.3 pre cent YoY from 5.0 pre cent in June.

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Market Watch: August 19, 2022

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