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What happened last week?
Canadian equity investors enjoyed another positive week, especially those who are overweight in U.S. stocks. Although Friday saw the Dow dip ¾% and the S&P 500 and the NASDAQ break-even, it was their best week, collectively, since mid-December. At the end of trading on Thursday the Dow, S&P 500 and NASDAQ delivered recording setting closing highs. Canada’s TSX mirrored U.S. indexes by also setting a new all-time closing high on Thursday as it rose a little more than ½% for the week.
Domestically, Canadian consumer inflation continues to moderate as the Consumer Price Index (CPI) rose 2.8% on a year-over-year basis in February, down from 2.9% in January. Groceries contributed to the small decline, while gasoline prices offset the dip after rising 0.8% for the month. The on-going slowing of inflation is positive news for consumers and, eventually, borrowers since interest rates were raised to temper and reduce price increases. The Bank of Canada has not indicated the timing of rate reductions. StatsCan release CBC and BoC
On Wednesday the U.S. Federal Reserve, as expected, kept its target range for the federal funds rate unchanged 5¼ to 5½%. Its plans to continue to reduce its holdings, effectively removing liquidity from capital markets, will also remain unchanged. Economic indicators have been positive with economic activity expanding at a solid pace. Job gains have remained strong, and the unemployment rate has remained low. Inflation has eased over the past year but remains elevated according to the Fed’s statement announcing its monetary policy update.
The Fed’s quarterly Summary of Economic Projections (SEP) indicated that three quarter-point rate reductions in 2024, another three in 2025, and two in 2026 are possible. Eventually, the federal funds rate is expected to settle at 2½ to 2¾ percent after 2026. The timing of rate cuts is unclear and are dependent on the continued trajectory of economic indicators. Fed Rate Announcement CNBC and Fed
What’s ahead for this week and beyond?
In Canada, no major economic announcements are scheduled.
In the U.S., February data for building permits, new home sales, pending home sales, home prices, mortgage market index, durable goods orders, and personal income will be released. The Federal Reserve’s primary inflation indicator, the Personal Consumption Expenditures (PCE) price index, will be reported on Friday, which will further inform upcoming interest rate announcements.
Globally, U.K. home prices and Gross Domestic Product, European industrial, services and business sentiment, selling price expectations, business climate, consumer confidence, and Japan’s Consumer Price Index and employment report will be announced.
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