Market Watch: Nov. 18, 2022

Wall Street’s main indexes ended lower on Wednesday as a downbeat forecast from Target spurred fresh concerns about retailers heading into the crucial holiday season. The TSX also ended lower, weighed down by declines in the energy and materials sectors. By Wednesday’s close, the Dow fell 39 points, the TSX lost 37 points, while the S&P 500 and Nasdaq dropped 33 and 175 points, respectively.

Data released Wednesday showed Canada’s annual inflation rate held steady at 6.9% in October, matching the previous month. Analysts are now expecting a 25- or 50-basis-point hike when the Bank of Canada meets again next month.

U.S. stock indexes fell on Thursday as hawkish comments from a key Fed official fueled concerns that the central bank won’t be pivoting away from higher rates anytime soon. Additionally, the number of Americans filing new jobless claims fell last week, indicating an exceptionally tight U.S. labour market, which should allow for more Fed tightening. By Thursday’s close, all three major U.S. indexes were down slightly. In Canada, the TSX lost 73 points on weakness once again in the energy and materials sectors.

North American Indexes Lose Ground

For the four trading days covered in this report, the Dow lost 202 points to close at 33,546, the S&P 500 dropped 47 points to settle at 3,946, while the tech-heavy Nasdaq sunk 178 points to close at 11,145. In Canada, the TSX lost 227 points to end at 19,884.

Strategy

Canadian home prices keep falling but available inventory in the market is increasing

Canadian home prices fell for an 8th month since buyers and sellers are adjusting to an environment of higher interest rates. The benchmark price for a home fell 1.2% in October, the smallest monthly decline since May, according to data released by the Canadian Real Estate Association. The latest figure brings the total decline to 10% since the February peak, with prices now flat compared with last year. Home sales edged up 1.3% in October but were down 36% from a year ago, leaving the volume below the low end before the pandemic. However, some analysts are seeing the rise in the number of sales as evidence the market is rebounding. It’s the first monthly gain in transactions since February. The Canadian housing market weakness has been driven by higher interest rates. Higher borrowing costs, after years of soaring home prices, have forced many buyers out of the market and caused home values to adjust. However, the market is estimating that the Bank of Canada is nearing the end of its rate-hiking campaign. Last month, the central bank increased its overnight rate by 50 basis points instead of the 75 basis points many were expecting. The change in expectations might be prompting more people to finally come to market, especially those who delayed selling their homes. This most likely pushed the amount of inventory available in the market to 3.8 months of housing stock, well above the record lows set earlier this year but still below long-term averages.

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by Scotia Wealth Management - The Zukiwsky Group

Market Watch: Nov. 18, 2022

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