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Stocks retreated Friday as a surge in the 10-year Treasury yield prompted broader concerns about the state of the economy.

The S&P 500 shed 1.26% to 4,224.16 and registered its first losing week in three. The Nasdaq Composite dropped 1.53% to 12,983.81. The Dow Jones Industrial Average lost 286.89 points, or 0.86%, to end at 33,127.28, dragged down in the session by American Express following a mixed earnings report.

The yield on the benchmark 10-year Treasury crossed 5% for the first time in 16 years on Thursday, a level that could ripple through the economy by raising rates on mortgages, credit cards, auto loans and more. Not to mention, it offers investors an attractive alternative to stocks.

https://www.cnbc.com/2023/10/19/stock-market-today-live-updates.html

https://www.foxnews.com/live-news/october-20-israel-hamas-war

 Published: 10/20/2023 4:24 PM ET

Extending the pullback seen over the two previous sessions, Canadian stocks showed a significant move to the downside during trading on Friday.

After coming under pressure early in the session, the benchmark the benchmark S&P/TSX Composite Index saw further downside in late-day trading before closing down 233.17 points or 1.2 percent at 19,115.64.

Concerns about the recent surge in treasury yields continued to weigh on Canadian stocks, with the yield on the U.S.’ benchmark ten-year note climbed above 5 percent for the first time since July 2007.

The recent advance by yields reflects ongoing worries about the outlook for interest rates, with the Federal Reserve signaling rates will remain higher for longer than previously anticipated.

Fears the Israel-Hamas war may escalate into a broader regional crisis also contributed to the negative sentiment on Bay Street.

Israeli Defense Minister Yoav Gallant told troops gathered at the Gaza border on Thursday that they would soon see the Palestinian enclave “from inside.”

Additionally, reports emerged that U.S. troops are being targeted at several military bases across Iraq and Syria, while a U.S. Navy warship destroyed cruise missiles and drones fired toward Israel by Houthi rebels in Yemen.

Telecom stocks turned in some of the market’s worst performances on the day, with the S&P/TSX Capped Communications Index plunging by 2.1 percent.

Financial, utilities and real estate stocks also saw considerable weakness, while energy stocks came under pressure amid a downturn by the price of crude oil.

In Canadian economic news, a report from Statistics Canada said Canadian retail sales edged down 0.1 percent to C$66.1 billion in August.

Statistics Canada said sales were down in six of nine subsectors and were led by decreases at motor vehicle and parts dealers.

Core retail sales, which exclude gasoline stations and fuel vendors and motor vehicle and parts dealers, fell by 0.3 percent during the month.

Evidently, you’re not the only investor who is nervous about Enbridge ENB-T -0.89%decrease. In the past 16 months, the pipeline operator’s shares have lost more than one-quarter of their value as dividend stocks of all kinds have been hammered by surging interest rates and fears of slowing economic growth. Enbridge’s stock, which closed Friday at $43.63 in Toronto, is now languishing about 34 per cent below its record high of more than $66, reached in 2015.

As Enbridge’s shares have slumped, its dividend yield – which moves in the opposite direction to the price – has climbed to more than 8 per cent. The yield has also gotten a boost from annual increases in the dividend, which has nearly tripled over the past decade.

Given Enbridge’s outsized yield, it’s reasonable to ask: Is the dividend safe? Or will Enbridge meet the same fate as Algonquin AQN-T -2.69%decrease, Kinder Morgan KMI-N -0.12%decrease and other former dividend-growth darlings whose rich payouts were ultimately unsustainable?

The short answer is: I don’t think you need to lose any sleep.

One reason for the recent weakness in Enbridge’s stock price is its agreement in September to acquire gas utilities in five U.S. states from U.S-based Dominion Energy Inc. D-N -1.53%decrease for US$14-billion. To help finance the acquisition, which was done at an attractive price of about 16.5 times the utilities’ earnings, Enbridge issued $4.6-billion of shares to a syndicate of underwriters in what is known as a bought deal.

However, to sell such a large chunk of stock amid less-than-favourable market conditions, the new shares were priced at $44.70 – a discount of more than 7 per cent to Enbridge’s closing price before the acquisition was announced.

Cory O’Krainetz, an analyst with Odlum Brown, called the bought deal price “disappointing.” But he said the acquisition, which will nearly double Enbridge’s lower-risk utilities business and create new avenues for growth, was “an opportunity Enbridge couldn’t refuse and … should be value accretive to shareholders. We expect Enbridge shares to trade at or below the equity offer price over the near term, but we see significant upside over the long term.”

Mr. O’Krainetz was right about Enbridge trading below the bought deal price, as the market has to absorb nearly 103 million new shares. But he’s not the only analyst who sees the gas utility acquisitions as being a good long-term fit for Calgary-based Enbridge.

The deal, which includes utilities in Ohio, North Carolina, Utah, Wyoming and Idaho, is “a unique opportunity given its scale and attractive valuation,” Robert Catellier, an analyst with CIBC World Markets, said in a note to clients. By reducing the weighting of Enbridge’s liquids pipelines business to about 50 per cent from 57 per cent, and increasing its utilities weighting to 22 per cent from 12 per cent, the acquisition accelerates Enbridge’s transition to lower-carbon energy and lowers its business risk thanks to the increase in its regulated earnings.

While Mr. Catellier acknowledged that Enbridge still faces risks related to securing the remaining funding for the transaction, he said the opportunity to invest about $1.7-billion annually in the rate base of the U.S. utilities will enhance Enbridge’s ability to achieve its target of mid-single-digit growth in EBITDA (earnings before interest, taxes, depreciation and amortization) over the next several years. Rate base is the value of assets on which a utility is permitted to earn a regulated rate of return, so an increasing rate base leads to higher earnings.

Enbridge’s growing earnings, in turn, should support future dividend increases, while preserving the company’s investment-grade credit ratings and keeping its dividend payout ratio within its target range of 60 per cent to 70 per cent of distributable cash flow per share, the company said. (Enbridge defines DCF as operating cash flow, minus preferred share dividends, maintenance capital expenditures and other unusual and non-operating items.)

Still, investors should temper their expectations for dividend growth. Until a few years ago, Enbridge was hiking its payout at double-digit percentage rates annually, but future raises will likely be in the low single digits. Mr. Catellier projects that the annual dividend will increase by 3.1 per cent to $3.66 for 2024, which is in line with the 3.2-per-cent raise that Enbridge announced last November.

So, not only does Enbridge’s dividend appear to be safe, but it will almost certainly continue to grow, albeit at a modest pace. Hopefully, you’re feeling a little less antsy now.

E-mail your questions to jheinzl@globeandmail.com.

An Indigenous-backed project seeking to export liquefied natural gas has signed a deal to support TC Energy Corp.’s TRP-T -0.13%decrease pipeline plans in northern British Columbia, leaving Enbridge Inc.’s ENB-T -0.20%decrease competing route in limbo.

The Nisga’a Nation, Western LNG and a group of natural gas producers called Rockies LNG are partners in their proposed Ksi Lisims LNG project near Gitlaxt’aamiks, which is home to the Nisga’a Lisims government led by elected president Eva Clayton.

Calgary-based TC Energy has been hired to work on revised designs for the planned Prince Rupert Gas Transmission (PRGT) pipeline, according to documents filed by Ksi Lisims this week to the B.C. Environmental Assessment Office. The filings are part of an application to obtain an environmental assessment certificate.

The PRGT route was originally intended to stretch nearly 900 kilometres from northeast B.C. to Lelu Island near Prince Rupert, B.C., and supply natural gas to Pacific NorthWest LNG. But Malaysia’s state-owned Petronas cancelled the Pacific NorthWest LNG joint venture in 2017.

Revisions need to be made to shorten the route so that natural gas would be transported from northeast B.C. to a site at Wil Milit on Pearse Island on the West Coast.

Ksi Lisims said its agreement with TC Energy calls for PRGT “to preserve the regulatory permits, prepare amendments for a potential delivery point to the site and develop work plans for the next phase.”

The decision by Ksi Lisims to sign the contract with TC Energy means Enbridge’s proposed Westcoast Connector Gas Transmission pipeline venture faces an uncertain future.

Enbridge spokesperson Jesse Semko said in a statement on Thursday that Westcoast Connector will continue to do work on its pipeline route. “That work includes discussing this proposed project with Indigenous groups, commercial partners and other stakeholders while simultaneously ensuring alignment with the B.C. government’s emission reduction, climate change and hydrogen strategy,” he said.

Westcoast Connector and PRGT initially received their environmental assessment certificates in 2014, and won approval for five-year extensions in 2019, giving them until Nov. 25, 2024, to “substantially start” pipeline construction.

“TC Energy would be responsible for obtaining any additional regulatory approvals, as well as potentially constructing, operating and owning this pipeline,” Ksi Lisims told the B.C. regulator.

Rockies LNG, whose president is Charlotte Raggett, is based in Calgary. Members of the group of gas producers are Birchcliff Energy Ltd., Advantage Oil & Gas Ltd., Peyto Exploration & Development Corp., NuVista Energy Ltd., Paramount Resources Ltd., Ovintiv Inc., Crescent Point Energy Corp. and Tourmaline Oil Corp., which announced this week that it will be acquiring another Rockies member, Bonavista Energy Corp.

The Nisga’a Nation, which signed a treaty in 1998, is welcoming the regulatory application by Ksi Lisims.

In March, the B.C. government introduced new environmental standards for LNG projects in a bid to spur net-zero emissions of greenhouse gases by 2030.

“We’re proud to see our net-zero project take another step forward,” Ms. Clayton said in a statement. “Ksi Lisims LNG is a once-in-a-generation opportunity for our people to build prosperity and economic independence.”

Ksi Lisims plans to use two floating facilities to produce LNG, with hydroelectricity powering motors for compressors in the liquefaction process. The project would then deploy other vessels to ship LNG to Asia, starting exports by early 2028.

“Ksi Lisims LNG will be one of the most significant Indigenous-supported industrial developments in Canadian history. The project is an example of economic reconciliation in action,” Ksi Lisims spokesperson Rebecca Scott said in a statement.

But climate activist organizations say the focus should be on renewable energy, not on fossil fuels such as natural gas and LNG. The David Suzuki Foundation and the Pembina Institute published separate studies in May that issued climate warnings about looming LNG exports from B.C.

A neighbouring First Nation, the Lax Kw’alaams, expressed doubts last year that Ksi Lisims could meet its goal of net-zero emissions. The Lax Kw’alaams band council opposes the Nisga’a-backed venture.

A portion of the proposed route for PRGT would cross the Gitxsan Nation’s unceded traditional territory.

“We appreciate the opportunity to explore the viability of this important project and will continue our engagement efforts with Indigenous and community partners as we progress discussions in this initial phase,” TC Energy spokesperson Suzanne Wilton said in an e-mail.

While revised route designs will be shorter than originally planned, PRGT would still be longer than the contentious Coastal GasLink pipeline project to be operated by TC Energy.

Coastal GasLink will be supplying the Shell PLC-led LNG Canada joint venture in Kitimat, B.C., where exports of natural gas in liquid form to Asia are slated to begin in mid-2025.

Coastal GasLink’s construction is 98 per cent completed. A group of Wet’suwet’en Nation hereditary chiefs has led a campaign to oppose Coastal GasLink, with 28 per cent of the route crossing the Wet’suwet’en’s unceded traditional territory. Wet’suwet’en hereditary chiefs say they have jurisdiction over that territory.

| Published: 10/19/2023 5:35 PM ET

The Canadian market closed at a two-week low on Thursday, as stocks fell amid concerns about interest rates and geopolitical tensions.

Healthcare, real estate, utilities and financials shares were among the major losers.

The benchmark S&P/TSX Composite Index ended with a loss of 101.89 points or 0.52% at 19,348.81.

Bausch Health Companies (BHC.TO) ended 5.37% down, and Tilray Inc (TLRY.TO) drifted down nearly 3%.

Real estate stocks Allied Properties (AP.UN.TO) ended nearly 6% down. Granite Real Estate (GRT.UN.TO) ended 3.5% down, while CDN Apartment (CAR.UN.TO), Riocan Real Estate (REI.UN.TO) and Killam Apartment (KMP.UN.TO) lost 2 to 2.7%.

Among the stocks in the Utilities sector, Brookfield Infra Partners (BIP.UN.TO), Innergex Renewable Energy (INE.TO), Algonquin Power and Utilities Corp (AQN.TO), Hydro One (H.TO) and Northland Power (NPI.TO) lost 1.4 to 3.2%.

Financials shares Goeasy (GSY.TO), Sun Life Financial (SLF.TO), Brookfield Corporation (BN.TO), Brookfield Asset Management (BAM.TO), Onex Corp (ONEX.TO) and EQB (EQB.TO) ended down 2.3 to 3%.

Mullen Group Ltd. (MTL.TO) gained 2.3% on strong results. The company reported a net income of $39.1 million, or $0.44 per share, for the third-quarter, up 2.9% and 7.3%, respectively, from a year-ago.

Canada Goose Holdings Inc (GOOS.TO) ended more than 4% down following a rating downgrade.

Data from Statistics Canada showed industrial producer prices in Canada rose by 0.4% in September, easing from an upwardly revised 1.9% hike in August. The Industrial Product Price Index increased 0.6% year-on-year in September following an upwardly revised flat reading in August.

Raw materials price index in Canada rose by 3.5% month-over-month in September, up from a 3% increase in August. Year-on-year, raw materials prices increased 2.4% in September.

Federal Reserve Chairman Jerome Powell acknowledged recent signs of cooling inflation, but said Thursday that the slowing in price increases was not enough yet to determine a trend and that the central bank would be “resolute” in its commitment to its 2% mandate.

“Inflation is still too high, and a few months of good data are only the beginning of what it will take to build confidence that inflation is moving down sustainably toward our goal,” Powell said in prepared remarks for his speech at the Economic Club of New York. “We cannot yet know how long these lower readings will persist, or where inflation will settle over coming quarters.”

“While the path is likely to be bumpy and take some time, my colleagues and I are united in our commitment to bringing inflation down sustainably to 2 percent,” Powell added.

The speech comes with questions over where the Fed heads from here after a succession of interest rate hikes aimed at cooling inflation. Powell said he doesn’t think rates are too high now. Stocks briefly turned lower as Powell spoke and the 10-year Treasury yield neared 5%.

“Does it feel like policy is too tight right now? I would have to say no,” he said. Still, he noted that “higher interest rates are difficult for everybody.”

Powell noted the progress made toward the Fed’s twin goals.

In recent days, data has shown that while inflation remains well above the target rate, the pace of monthly increases has decelerated and the annual rate has slowed to 3.7% from more than 9% in June 2022.

“Incoming data over recent months show ongoing progress toward both of our dual mandate goals —maximum employment and stable prices,” he said.

The speech was delayed at the onset by protesters from the group Climate Defiance who charged the dais at the club’s dinner and held up a sign saying “Fed is burning” surrounded by the words “money, futures and planet.”

After a short delay, Powell noted the labor market and economic growth may need to slow to ultimately achieve the Fed’s goal.

“Still, the record suggests that a sustainable return to our 2 percent inflation goal is likely to require a period of below-trend growth and some further softening in labor market conditions,” Powell said.

Fed officials have been using interest rate hikes in part to try to level out a supply-demand imbalance in the jobs market. The Fed has raised rates 11 times since March 2022 for a total of 5.25 percentage points. Coming from the near-zero level for the fed funds rate, that has taken the benchmark rate to its highest level in some 22 years.

“We’re very far from the effective lower bound, and the economy is handling it just fine,” Powell said.

The comments come the same day initial jobless claims hit their lowest weekly level since early in 2023, indicating that the labor market is still tight and could exert upward pressure on inflation.

Robust job creation in September and a slow pace of layoffs could put progress on inflation at risk.

“Additional evidence of persistently above-trend growth, or that tightness in the labor market is no longer easing, could put further progress on inflation at risk and could warrant further tightening of monetary policy,” he said.

In recent days, other Fed officials have said they think the Fed can be patient from here. Even some members who favor tighter monetary policy have said they think the Fed can halt rate hikes at least for now while they watch the lagged impact the rate hikes are expected to have on the economy.

Markets widely expect the Fed to hold off on additional rate hikes, though there remain questions over when officials might begin cutting rates.

Powell was noncommittal on the future of policy.

Given the uncertainties and risks, and how far we have come, the Committee is proceeding carefully. We will make decisions about the extent of additional policy firming and how long policy will remain restrictive based on the totality of the incoming data, the evolving outlook, and the balance of risks,” he said.

Bank of Nova Scotia BNS-T -2.17%decrease is cutting 3 per cent of its global work force ahead of launching its strategic turnaround plan, deepening the streak of job cuts on Bay Street this year.

The restructuring plans announced Wednesday – which also include trimming some real estate holdings and writing down the value of an investment in China-based Bank of Xi’an Co. Ltd. – mark chief executive officer Scott Thomson’s first major move to slash costs since taking on the top job in February.

Scotiabank said that the $590-million in charges to cover the costs will affect its fourth-quarter earnings per share by about 49 cents and its common equity tier 1 ratio – a measure of a lender’s ability to absorb losses – by approximately 10 basis points. (A basis point is one-hundredth of a percentage point.) Scotiabank expects to book the cost savings from these cuts by 2025.

Canada’s fourth-largest lender is preparing to unveil an overhaul strategy as Mr. Thomson seeks to revive the lender’s beleaguered share price. He has said that the plan – set to be unveiled in December – will focus on improving employee culture to improve customer experience, as well as expanding its Canadian business and rejigging its international unit in Latin America.

Scotiabank said in a statement its cuts to its team of 91,000 employees are a result of the bank’s digitization and automation efforts, as well as changes in how customers access their banking products and services. The lender is also continuing to streamline its operations to reallocate resources to key areas where it believes it can expand its business. It did not disclose the total number of jobs affected.

Scotiabank CEO Scott Thomson unveils first leadership shakeup

Some of Canada’s other major banks have been trimming their teams as the lenders face mounting expenses, rising provisions for potential loan defaults and tightening capital requirements. Scotiabank joins Royal Bank of Canada RY-T -1.63%decrease and Bank of Montreal BMO-T -2.29%decrease in unveiling broader cutsin recent months.

In an internal note to Scotiabank employees viewed by The Globe and Mail, Mr. Thomson said that the leadership team is treating affected staff “compassionately and with care,” and helping people find new jobs in the bank, where possible.

“I know this change is difficult and I want to thank you for your support and continued focus on delivering for our clients, the bank and each other,” Mr. Thomson said in the memo. “Today’s announcement is an important step in enabling our new strategy. Moving forward, we will be focused on unlocking our significant potential and ensuring our bank is better equipped to deliver profitable and sustainable growth.”

RBC was the first major lender to signal staffing reductions. During its third-quarter results release at the end of August, the bank said that its number of full-time employees fell 1 per cent from the previous quarter as workers left the bank. It said it expects to further decrease its work force by 1 per cent to 2 per cent next quarter.

Bank of Montreal also shed jobs, reducing its work force by 2.5 per cent. The costs related to the staff cuts stretched across the bank, but largely stemmed from the bank’s Canadian personal and commercial banking unit, its corporate division and its capital markets business.

Scotiabank’s work-force reductions will result in a restructuring charge and severance provisions of about $247-million.

RBC analyst Darko Mihelic said that the moves mark “a small step in the right direction” and that he interprets “the write-downs as a clean-up of the balance sheet.”

The layoffs were part of a broader announcement on costs that Scotiabank expects to affect its earnings results for the fourth quarter. The bank is consolidating its real estate footprint. It anticipates a charge of $63-million in the fourth quarter as it vacated certain premises and service contracts.

“Restructuring charges at the Canadian banks in difficult revenue environments are not unusual, and we may see other banks follow suit (as early as Q4),” BMO analyst Sohrab Movahedi said in a note to clients.

It will also post an impairment charge of $280-million related to the bank’s 18-per-cent investment in Bank of Xi’an. The China-based lender’s $581-million market value has consistently been below the $1-billion carrying value, the Canadian bank said.

Scotiabank has operated in China for 30 years, according to its website. In addition to its investment in Bank of Xi’an, it has two branches in Shanghai and Guangzhou, and a wealth-management joint venture with the Bank of Beijing.

Shares of Scotiabank fell 2.2 per cent in Toronto on Wednesday.

Published: 10/18/2023 5:37 PM ET

The Canadian market ended on a weak note on widespread selling on Thursday with those from industrials and financials sectors suffering sharp losses.

Rising bond yields, concerns about the outlook for interest rates and escalating tensions in the Middle East weighed on the market.

According to reports, a deadly missile attack on Al-Ahli Baptist Hospital in Gaza killed more than 500 people including women and children.

Hamas attributed the blast to an Israeli airstrike, but the Israeli military said it was not involved and the explosion was caused by a misfired Palestinian rocket.

The benchmark S&P/TSX Composite Index ended down 242.10 points or 1.23 percent at 19,450.70, slightly off the day’s low of 19,434.34.

BRP Inc (DOO.TO) fell 7.3%. ATS Corporation (ATS.TO) drifted down nearly 6%. Stantec Inc (STN.TO), TFI International (TFII.TO), Magna International (MG.TO), Cargojet (CJT.TO), Canadian National Railway (CNR.TO), goeasy (GSY.TO), Premium Brands Holdings (PBH.TO), Bank of Montreal (BMO.TO) and Fairfax Financial Holdings (FFH.TO) lost 2 to 4.5%.

CGI Inc (GIB.A.TO) announced that its subsidiary CGI Federal has received a multi-year contract worth about $522.6 million to modernize systems and technology of the U.S. Environmental Protection Agency. The stocks ended marginally up.

On the economic front, data from the Canada Mortgage and Housing Corporation showed housing starts in Canada edged up by 8% over a month earlier to 270,466 units in September.