Author: Consultant

Stocks have moved sharply lower in morning trading on Wednesday, adding to the modest losses posted in the previous session. The major averages have all moved to the downside, with the Dow pulling back off its best closing level in well over a year.

Currently, the major averages are just off their lows of the session. The Dow is down 244.87 points or 0.7 percent at 35,385.81, the Nasdaq is down 263.66 points or 1.9 percent at 14,020.25 and the S&P 500 is down 53.36 points or 1.2 percent at 4,523.37.

The sell-off on Wall Street comes after credit rating agency Fitch Ratings unexpectedly downgraded the United States’ credit rating.

Fitch downgraded the U.S.’ long-term foreign-currency issuer default rating to AA+ from AAA, citing a “steady deterioration in standards of governance over the last 20 years.”

“The repeated debt-limit political standoffs and last-minute resolutions have eroded confidence in fiscal management,” Fitch said.

The move drew a strong response from the U.S., with Treasury Secretary Janet Yellen calling the change “arbitrary and based on outdated data.”

In U.S. economic news, payroll processor ADP released a report showing U.S. private sector employment jumped by much more than expected in the month of July.

ADP said private sector employment shot up by 324,000 jobs in July after surging by a downwardly revised 455,000 jobs in June.

Economists had expected private sector employment to increase by 189,000 jobs compared to the spike of 497,000 jobs originally reported for the previous month.

“The economy is doing better than expected and a healthy labor market continues to support household spending,” said ADP chief economist Nela Richardson. “We continue to see a slowdown in pay growth without broad-based job loss.”

While the report points to continued strength in the U.S. labor market, the data may lead to renewed concerns about the outlook for interest rates.

On Friday, the Labor Department is scheduled to release its more closely watched report on employment in the month of July.

Economists currently employment to increase by 200,000 jobs in July after climbing by 209,000 jobs in June, while the unemployment rate is expected to remain at 3.6 percent.

Sector News

Semiconductor stocks have shown a substantial move to the downside on the day, dragging the Philadelphia Semiconductor Index down by 2.9 percent.

Chipmaker Advanced Micro Devices (AMD) has moved sharply lower after reporting better than expected second quarter results but providing disappointing sales guidance for the current quarter.

Considerable weakness is also visible among gold stocks, as reflected by the 2.7 percent slump by the NYSE Arca Gold Bugs Index.

The weakness in the gold sector comes amid a modest decrease by the price of the precious metal, with gold for December delivery slipping $5.90 to $1,972.90 an ounce.

Steel, software, airline and banking stocks are also seeing significant weakness, moving lower along with most of the other major sectors.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved notably lower during trading on Wednesday. Japan’s Nikkei 225 Index plunged by 2.3 percent, while China’s Shanghai Composite Index slumped by 0.9 percent.

The major European markets have also shown significant moves to the downside on the day. While the U.K.’s FTSE 100 Index has tumbled by 1.3 percent, the German DAX Index is down by 1.2 percent and the French CAC 40 Index is down by 1.0 percent.

In the bond market, treasuries are extending the steep drop seen in the previous session. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, is up by 5.1 basis points at 4.102 percent.

Aug 1, 2023 Oil prices rallied to a fresh three-month high on Monday and recorded their steepest monthly gains since January 2022, supported by signs of tightening global supply and rising demand through the rest of this year.

More actively traded October Brent crude futures rose $1.02, or 1.2%, to settle at $85.43 a barrel. The September Brent contract, which expired at settlement on Monday, rose 0.7% to close at $85.56 a barrel.

U.S. West Texas Intermediate crude futures rallied $1.22, or 1.5%, to $81.80 a barrel.

Both Brent and WTI hit their highest since late April for a third consecutive session on Monday, after notching their fifth straight weekly gains on Friday.

Saudi Arabia is expected to extend a voluntary oil output cut of 1 million barrels per day (bpd) for another month to include September. Saudi output fell by 860,000 barrels per day (bpd) in July, while total production from the Organization of Petroleum Exporting Countries was 840,000 bpd lower, a Reuters survey found on Monday.

“Crude prices are finishing a solid month on a high note as demand prospects remain impressive and no one doubts that OPEC+ will keep this market tight,” OANDA analyst Edward Moya said.

Oil inventories are beginning to drop elsewhere too, especially in the U.S., where the government has started refilling the Strategic Petroleum Reserve from its lowest level in multiple decades. Five analysts polled by Reuters on Monday estimated on average that U.S. crude inventories fell by about 900,000 barrels in the week to July 28.

“After the end of SPR releases and recession fears and a liquidity drain due to bank stability fears, which caused the markets to ignore a looming supply squeeze, the coming supply deficits are getting too big to ignore,” Price Futures Group analyst Phil Flynn said.

Goldman Sachs estimated that global oil demand rose to a record 102.8 million bpd in July and it revised up 2023 demand by about 550,000 bpd on stronger economic growth estimates in India and the U.S., offsetting a downgrade for China’s consumption.

RESULTS BY SEGMENT

Normalized EBITDA (1) (2)	Three Months EndedJune 30
($ millions)	2023	2022
Utilities	102	116
Midstream	134	163
Sub-total: Operating Segments	236	279
Corporate/Other	3	(3)
	$                   239	$                   276

(1)	Non‑GAAP financial measure; see discussion in Non‑GAAP Financial Measures section of this new release.
(2)	In the third quarter of 2022, Management changed AltaGas’ non-GAAP policy to remove normalization adjustments relating to acquired contingencies. Prior periods have been restated to reflect this change. Please refer to the Non-GAAP Financial Measures section of this news release for additional details.

Income (Loss) Before Income Taxes		Three Months EndedJune 30
($ millions)	2023	2022
Utilities	105	(9)
Midstream	181	181
Sub-total: Operating Segments	286	172
Corporate/Other	(104)	(87)
	$                  182	$                    85

https://www.newswire.ca/news-releases/altagas-reports-second-quarter-2023-results-881180223.html

Published: 8/1/2023 7:07 AM ET

Market sentiment remained mixed ahead of key data releases lined up for the week. Manufacturing PMI and Job Openings data from the U.S are due later in the day. Bank of England’s interest rate decision and Services sector PMI readings from the U.S. are due on Thursday. The unemployment report and the monthly non-farm payrolls report are due on Friday.

European benchmarks are trading with deep losses amidst a decline in manufacturing PMI. Wall Street Futures are trading with mild losses. Asian stocks finished trading on a mixed note, amidst decline in manufacturing activity and continued hopes of stimulus from China.

Dollar Index gained amidst the Dollar’s strength. Bond yields moved in a mixed fashion. Crude oil prices gained amidst hopes of stimulus measures from China. Gold prices declined. Cryptocurrencies are trading mostly lower.

• West Coast membership of the International Longshoremen and Warehouse Union of Canada voted down a tentative deal late Friday in a two-day vote
• The ILWU, Canada chapter is calling on the British Columbia Maritime Employers Association to come back to the table and negotiate
• The 14-day strike has hit hard U.S. trade that is imported through the ports of Vancouver and Prince Rupert with rail delays in upwards of 78 days and over 80% of trade not coming in.
• Chemicals for drinking water, product manufacturing, holiday items and footwear and apparel are amongst the containers delayed

https://www.cnbc.com/2023/07/29/dock-workers-at-key-canadian-ports-reject-labor-deal-creating-further-trade-uncertainty.html

Monday, July 31

China releases purchasing managers indexes for July. Japan releases June retail sales and industrial production data, plus July consumer confidence.

Euro area releases real GDP for second quarter, plus July consumer price indexes.

Earnings include: Avis Budget Group Inc, Loews

—

Tuesday, Aug. 1

China releases the Caixin manufacturing PMI for July, and Japan releases its latest jobless data and manufacturing PMI.

Euro area releases manufacturing PMIs and jobs reports. The UK releases both nationwide house prices and its manufacturing PMI.

930 am ET: S&P Global Manufacturing PMI for July

10 am ET: U.S. construction spending for June.

10 am ET: U.S. job openings and labour turnover survey.

10 am ET: U.S. ISM Manufacturing PMI

North American auto sales

Earnings include: Merck, Toyota Motor, Pfizer, AMD, HSBC, Caterpillar, Starbucks, Uber, Marriott International, Molson Coors Brewing, Mosaic, Norwegian Cruise Line, RioCan REIT, Dream Industrial REIT, EQB, Neighbourly Pharmacy

—

Wednesday, Aug. 2

815 am ET: ADP U.S. National Employment Report for July

Earnings include: Shopify, CVS Health, McKesson, Suncor Energy, Waste Connections, Nutrien, Kraft Heinz, Yum! Brands, Fortis, Tourmaline Oil, Cameco, Clorox, MGM, Fox Corp., Ceridian, Zillow, U-Haul Holding, Robinhood Markets, IGM Financial, Bausch + Lomb, Kinross Gold, Bausch + Lomb, Colliers International, B2Gold, Capital Power, Capstone Mining, Scotts Miracle-Gro, Spin Master, Tripadvisor, InterRent REIT, Ballard Power, Artis REIT, NFI Group, Slate Office REIT, Thomson Reuters, Tupperware Brands

—

Thursday, Aug 3

China and Japan releases PMI services data.

Euro area releases July services PMI data, as well as its latest producer price index. Germany releases its trade surplus, Italy its retail sales and the UK its services PMI.

Bank of England policy announcement.

830 am ET: U.S. jobless claims for last week.

830 am ET: U.S. second quarter productivity and unit labour costs.

945 am ET: S&P Global Services/Composite PMI for July

10 am ET: U.S. factory orders for June. Consensus is for a rise of 1.8%, faster than May’s 0.3%.

10 am ET: U.S. ISM Services PMI

Earnings include: Apple, Amazon, ConocoPhillips, Airbnb, Booking, Canadian Natural Resources, BCE, Warner Bros. Discovery, Fairfax Financial, Kellogg, Pembina Pipeline, Brookfield Infrastructure, Open Text, DraftKings, Hyatt, Ivanhoe Mines, iA Financial, Hasbro, Canadian Apartment REIT, Gildan Activewear, SNC-Lavalin Group, Parkland Fuel, Bombardier, Hilton Grand Vacations, Bausch Health, Definity Financial, TransAlta Renewables, Lightspeed Commerce, Maple Leaf Foods, Jamieson Wellness, Interfor, Cascades, Algoma Steel, Lion Electric, Canaccord Genuity, Silvercorp Metals, Chorus Aviation, Plaza Retail REIT, Western Forest Products, True North Commercial REIT

—

Friday, Aug 4

Euro area retails sales for June, plus Germany factory orders, and France and Italy industrial production.

OPEC meeting

830 am ET: Canada’s July employment report. Consensus is net job gains of 25,000, which would be down from June’s job gains of 59,900. The unemployment rate is expected to rise one notch to 5.5%. Average hourly wages are expected to be up 4.2% from a year earlier, marking no change from June’s reading.

830 am ET: U.S. nonfarm payrolls for July. Consensus is for net job gains of 200,000, down modestly from gains of 209,000 in June. The unemployment rate is expected to hold steady at 4.2%. Average hourly earnings are expected to be up 0.3% from the previous month.

10 am ET: Canada Ivey PMI

10 am ET: Global Supply Chain Pressure Index

Earnings include: Enbridge, Telus, Magna International, Brookfield Renewable, Brookfield Business, TransAlta, Dentalcorp Holdings, AMC Networks, Boston Pizza Royalties, Dorel Industries

Published: 7/28/2023 3:06 PM ET

Gold futures settled higher on Friday as the dollar turned weak after data on personal consumption expenditure indicated a slowdown in U.S. inflation.

The data has helped ease concerns about the outlook for interest rates, and raised hopes the Fed will end its tightening cycle soon.

The dollar index dropped to 101.36, and despite regaining some lost ground, remains weak at 101.60, trailing previous close by about 0.17%.

Gold futures for August ended higher by $14.70 or about 0.8% at $1,960.40 an ounce. Gold futures shed about 0.3% in the week.

Silver futures for September closed higher by $0.128 or about 0.5% at $24.495 an ounce, while Copper futures for September settled at $3.9265 per pound, gaining $0.510 or about 1.3%.

Data released by the Commerce Department showed personal income rose by 0.3% in June after climbing by an upwardly revised 0.5% in May. Economists had expected personal income to increase by 0.5% compared to the 0.4% advance originally reported for the previous month.

Meanwhile, personal spending climbed by 0.5% in June after inching up by an upwardly revised 0.2% in May. Economists had expected personal spending to rise by 0.4% compared to the 0.1% uptick originally reported for the previous month.

Core PCE prices, which exclude food and energy, went up by 0.2% month-over-month in June 2023, easing from a 0.3% increase in May. The annual rate, the Federal Reserve’s preferred gauge to measure inflation, rose by 4.1%, the lowest since September 2021.

Published: 7/28/2023 3:31 PM ET

Oil prices climbed higher on Friday, and the most active gold futures contract posted gains for the fifth straight week, amid easing U.S. recession fears, and on optimism over increased demand for oil in the U.S. and China.

Warnings of tight supply due to production cuts by OPEC and its allies contributed as well to the uptick in oil prices.

West Texas Intermediate Crude oil futures for September ended higher by $0.49 or about 0.6% at $80.58 a barrel.

WTI crude futures gained about 4.6% in the week. Overall, in five weeks, WTI has gained 16%.

Brent crude futures settled at $84.99 a barrel today, gaining $0.75 or about 0.9%. Brent crude has gained 14.6% in five weeks.

Demand worries have eased after a slew of U.S. economic data released on Thursday pointed to a resilient economy.

Data showing the U.S. economy grew more than expected in the second quarter, has helped quell fears of an imminent recession.

Also, weekly jobless claims continued to fall and new orders for key manufactured capital goods unexpectedly rose in June, helping ease fears of slowing demand.

Meanwhile, China stimulus hopes spurred expectations of oil demand regeneration from the world’s largest importer of crude oil.

Signs that inflation pressures in the United States are steadily easing emerged Friday in reports that consumer prices rose in June at their slowest pace in more than two years and that wage growth cooled last quarter.

Together, the figures provided the latest signs that the Federal Reserve’s drive to tame inflation may succeed without triggering a recession, an outcome known as a “soft landing.”

A price gauge closely monitored by the Fed rose just 3 per cent in June from a year earlier. That was down from a 3.8 per cent annual increase in May, though still above the Fed’s 2 per cent inflation target. On a monthly basis, prices rose 0.2 per cent from May to June, up slightly from 0.1 per cent the previous month.

Last month’s sharp slowdown in year-over-year inflation largely reflected falling gas prices, as well as milder increases in grocery costs. With supply chains having largely healed from post-pandemic disruptions, the costs of new and used cars, furniture and appliances also fell in June.

The cost of some services, though, continued to surge. Average prices of movie tickets rose 0.5 per cent from May to June, and are up 6.2 per cent from a year earlier. Veterinary services, up 0.5 per cent last month, are 10.5 per cent higher than a year ago. And restaurant meal prices increased 0.4 per cent in June; they’re up 7.1 per cent from 12 months earlier.

A measure of “core” prices, which excludes volatile food and energy costs, did remain elevated even though it also eased last month. Economists track core prices because they are considered a better signal of where inflation is headed. Those still-high underlying inflation pressures are a key reason why the Fed raised its short-term interest rate Wednesday to a 22-year high.

Core prices were still 4.1 per cent higher than they were a year ago, well above the Fed’s target, though down from 4.6 per cent in May. From May to June, core inflation was just 0.2 per cent, down from 0.3 per cent the previous month, an encouraging sign.

A separate report Friday from the Labor Department showed that a gauge of wages and salaries grew more slowly in the April-June quarter, suggesting that employers were feeling less pressure to boost pay as the job market cools.

Employee pay, excluding government workers, rose 1 per cent, down from 1.2 per cent in the first three months of 2023. Compared with a year earlier, wages and salaries grew 4.6 per cent, down from 5.1 per cent in the first quarter.

The Fed is closely watching the pay gauge, known as the employment cost index. Smaller wage increases should slow inflation over time, because companies are less likely to need to raise prices to cover their higher labour costs.

Taken together, Friday’s data “will provide further support to the view that the economy is in the midst of a soft landing,” said Kathy Bostjancic, chief economist at Nationwide. The softer wage data, she suggested, “will be welcomed by Fed officials.”

Americans’ average paychecks are still growing briskly, boosting their ability to spend and underscoring the economy’s resiliency. The inflation report that the Commerce Department issued Friday showed that consumer spending jumped in June, despite two years of high inflation and 11 Fed rate hikes over 17 months. From May to June, consumer spending rose 0.5 per cent, up from 0.2 per cent the previous month.

“Better push out those recession forecasts by another quarter,” Stephen Stanley, chief U.S. economist at investment bank Santander, wrote in a research note.

The inflation gauge that was issued Friday, called the personal consumption expenditures price index, is separate from the better-known consumer price index. Earlier this month, the government reported that the CPI rose 3 per cent in June from 12 months earlier.

The Fed prefers the PCE index because it accounts for changes in how people shop when inflation jumps – when, for example, consumers shift away from pricey national brands in favour of cheaper store brands. And housing costs, which are among the biggest inflation drivers but many economists think aren’t well-measured, carry about half the weight in the PCE than the CPI.

With inflation now steadily cooling, consumers are becoming more optimistic about the economy, a trend that could lead them to keep spending and driving growth.

On Friday, the University of Michigan reported that its consumer sentiment index rose in June to its highest level since October 2021, though it has still recovered only about half of the drop caused by the pandemic. And earlier this week, the Conference Board, a business research group, said its consumer confidence index rose this month to its highest point in two years.

The U.S. economy is in a hopeful but precarious place: A solid job market is bolstering hiring, lifting wages and keeping unemployment near a half-century low. Yet inflation is weakening rather than rising, as it typically does when unemployment is low. That suggests that the Fed may be able to achieve a soft landing.

The Fed’s policy-makers, though, are concerned that the steadily growing economy could help perpetuate inflation. This can occur as persistent consumer demand enables more companies to raise prices, thereby keeping inflation above the Fed’s target and potentially causing the central bank to raise rates even higher.

The latest evidence of the economy’s resilience came Thursday, when the government reported that it grew at a 2.4 per cent annual rate in the April-June quarter – faster than analysts had forecast and an acceleration from a 2 per cent growth rate in the first three months of the year.

At a news conference Wednesday, Chair Jerome Powell suggested that the Fed’s benchmark short-term rate, now at about 5.3 per cent, was high enough to restrain the overall economy and likely tame inflation over time. But Powell added that the Fed would need to see more evidence that inflation has been sustainably subdued before it would consider ending its rate hikes.

Powell declined to offer any signal of the central bank’s likely next moves. In June, Fed officials had forecast two more rate hikes this year, including Wednesday’s.

“I would say it is certainly possible that we would raise (rates) again at the September meeting, if the data warranted,” Powell said Wednesday, “and I would also say it’s possible that we would choose to hold steady at that meeting.”