Investment update
Weekly insight into the marketplace.
October 21 to 25, 2024
Markets fell from record highs
While Wall Street experienced a mixed week, Canada’s TSX fell over five consecutive days. On Monday, the Nasdaq was the only major North American index to close in positive territory with a marginal 0.2% gain. The other benchmarks all declined, with the Dow faring worst (down 0.8%), as investors braced for a barrage of third-quarter corporate-earnings reports. The 10-year U.S. Treasury yield also jumped 10 basis points to 4.18%, the highest level since July. Tuesday’s results mirrored Monday’s session, as doubt about the size of the U.S. Federal Reserve’s (The Fed) next interest-rate cut grew. This marked the first back-to-back daily losses for the S&P 500 since September 6. On Wednesday, losses mounted across the board. The Dow, S&P 500 and the TSX all declined around 1% and the Nasdaq slid 1.6% ahead of Tesla’s quarterly earnings report (the week’s main attraction) that arrived after the closing bell. Tesla’s better-than-expected results helped the Nasdaq and the S&P 500 turn positive on Thursday, but the Dow and the TSX continued to fall. Disappointing results from Boeing and IBM weighed on the Dow. The major indexes were mixed again on Friday, with both the Dow and the S&P 500 snapping six-week winning streaks. The TSX posted a weekly loss of 1.45% and the Nasdaq scored a slight gain.
The Bank of Canada cut interest rates by 50 basis points
On Wednesday, Canada’s central bank delivered its fourth interest-rate reduction since June. This time, policy-makers opted for an oversized 50-basis-point cut. It was the first cut of this size since March 2020, bringing the Bank’s policy rate to 3.75% (down from 4.25%). “We took a bigger step today because inflation is now back to the 2% target,” said Bank of Canada Governor Tiff Macklem. “Price pressures are no longer broad-based, and both our measures of core inflation are now under 2.5%. Our surveys also find that business and consumer expectations of inflation have shifted down and are nearing normal. All this suggests we are back to low inflation. This is good news for Canadians. Now our focus is to maintain low, stable inflation. We need to stick the landing.” Inflation slowed to 1.6% in September, down from 2.7% in June.
Q3 earnings reports stood out
Over 100 companies listed on the S&P 500 delivered Q3 results last week, giving investors a lot to digest. Tesla’s report – which is always a highlight, for better or for worse – generated favourable headlines, despite reporting lower revenue than projected (US$25.18 billion vs. US$25.4 billion). Still, the company’s Q3 results topped the previous quarter and outpaced profits from the same period last year. This sent Tesla shares surging 20% through the week, adding US$80 billion in market cap. Other names in the news: Coca Cola beat expectations with revenue of US$11.9 billion; UPS snapped a 10-quarter streak of revenue misses, generating US$22.2 billion vs. the US$22.14 billion that was forecast; and Boeing, on the heels of its factory workers rejecting a new contract offer and extending their six-week strike, reported a US$6 billion quarterly loss. In Canada, Rogers reported a $526 million quarterly profit (compared with a loss last year), and railway giant Canadian Pacific Kansas City posted revenue of $2.6 billion, which missed its estimate, but improved from the same quarter last year.
The stock and bond market*
| Index | Close | Week | YTD |
|---|---|---|---|
| S&P/TSX Composite | 24,463.67 | -1.45% | 16.72% |
| Dow Jones Industrial Average | 42,114.40 | -2.68% | 11.74% |
| S&P 500 Index | 5,808.12 | -0.96% | 21.77% |
| NASDAQ Composite | 18,518.61 | 0.16% | 23.36% |
| 10-year Canadian Bond Yield | 3.23% | 0.10% | 0.13% |
| 10-year U.S. Treasury Yield | 4.25% | 0.17% | 0.37% |
| WTI Crude Oil (US$/barrel) | $71.78 | 3.70% | 0.18% |
| Canadian Dollar | US$0.7198 | -0.68% | -4.67% |
| Bank of Canada Prime Rate 5.95% | |||
*Weekly performance ending October 25, 2024. Source: Bloomberg.
U.S. inflation data (October 31): The Fed’s preferred gauge to measure underlying inflation – the core Personal Consumption Expenditures (PCE) price index – was up 0.1% on monthly basis in August, but it fell below the 0.2% that was expected. Following the Fed’s first interest-rate cut in September, investors will keep a close watch on this week’s data for its potential impact on further rate changes.
Circle these dates
November 6 to 7: U.S. Federal Reserve policy meetings and interest-rate announcement
November 28: U.S. markets closed for Thanksgiving Day
The commentary in this report is based on current market conditions and market media sources available to the public and may change without prior warning at any time. The forecasts provided herein are not guarantees of future performance and include risks, uncertainty and assumptions. While Co-operators Life Insurance Company (“Co-operators”) believes these assumptions are reasonable, there is no guarantee they will be confirmed. This report is not a guarantee of future investment performance, nor should undue reliance be placed on this report. This report is provided as a general source of information for a specific point in time and should not be considered solicitation to buy or sell any investment. Nothing contained in this report constitutes investment, legal, tax or other advice. The content in this report should not be relied upon in making an investment or other decision, and individuals should obtain relevant and specific professional advice and read the terms and conditions contained in the relevant offering documents carefully before any investment decision is made. Co-operators is not responsible for any loss or damage as a result of reliance on the information contained in this report. Co-operators makes no representations or warranties as to the information contained herein and does not guarantee its accuracy, timeliness, completeness or usefulness. Co-operators is committed to protecting the privacy, confidentiality, accuracy and security of the personal information it collects, uses, retains and discloses in the course of conducting business. Please visit cooperators.ca/privacy for more information. Co-operators® is a registered trademark of Co-operators Group Limited and is used with permission. Investing in your future. Together.TM is a trademark of Co-operators Group Limited. If you are a client who has received this, and you have questions or want to discuss your investments, please contact your Financial Advisor.
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