Major indexes in both Canada and the U.S. opened higher Friday and were on track for solid weekly gains after softer-than-expected readings on October hiring in both countries eased concerns about the future path of interest rates.
At 9:31 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was up 90.63 points, or 0.46 per cent, at 19,716.97. Canada’s main index was up more than 4 per cent heading into Friday’s session.
In the U.S., the Dow Jones Industrial Average rose 149.75 points, or 0.44 per cent, at the open to 33,988.83.
The S&P 500 opened higher by 16.45 points, or 0.38 per cent, at 4,334.23, while the Nasdaq Composite gained 68.66 points, or 0.52 per cent, to 13,362.85 at the opening bell. All three indexes were also positive for the week ahead of Friday’s opening bell, with the Nasdaq up more than 5 per cent.
Jobs data in both Canada and the United States were key to market action today.
In the U.S., the economy generated 150,000 new jobs last month. That was below the 170,000 economists had been forecasting and follows a surprisingly strong gain of 297,000 jobs in September. September’s gain was revised down in Friday’s report from the initial estimate of a 336,000-job increase. Earlier this week, the Federal Reserve left interest rates unchanged, noting continued resilience in the U.S. economy.
“Despite the cooler jobs report and emerging cracks in the labor market, the unemployment rate is still near 50-year lows, and we would expect that the Fed will remain vigilant in its inflation-fighting strategy,” Stephen J. Rich, Chairman & CEO of Mutual of America Capital Management, said.
“With the potential for an additional rate hike in December and the likelihood that rates will be higher for longer during 2024, a soft landing that avoids a recession and continues to support the wage and employment gains that the middle class has made is becoming less likely.”
In Canada, Statistics Canada said 17,500 jobs were created in October. Economists had been forecasting a gain of about 25,000 positions. Canada’s jobless rate edged up to 5.7 per cent, from 5.5 per cent a month earlier.
“Overall, today’s report is further evidence that more rate hikes are not necessary to cool the economy, and combined with a weaker U.S. figure as well could see market expectations for interest rate cuts brought forward earlier into 2024,” CIBC senior economist Andrew Grantham said.
On the corporate side, Canadian earnings continue to roll in. Tim Hortons parent Restaurant Brands reports before the start of trading, as does energy company Enbridge Inc. and telecom giant Telus.
Ahead of the opening bell, Restaurant Brands said total revenue in the latest quarter rose to US$1.84-billion, from US$1.73-billion a year earlier, compared with analysts’ average estimate of US$1.87-billion. Restaurant Brands posted an adjusted profit of 90 US cents per share, beating estimates of 86 US cents.
The Globe’s Alexandra Posadzki reports this morning that Telus Corp.’s third-quarter profit plunged 75 per cent to $137-million, even as it grew its revenue and added new wireless customers. Telus reported $5-billion of revenue for the three-month period ended Sept. 30, up 7.2 per cent from the same period last year when it had $4.67-billion in revenue. The company’s adjusted earnings amounted to 25 cents per share, down from 34 cents per share during the same quarter last year. Analysts had been expecting 24 cents per share of adjusted earnings and $5.08-billion of revenue, according to the consensus estimate from S&P Capital IQ.
The Vancouver-based telecom attributed the lower profit to higher restructuring costs relating to its ongoing cost efficiency program and its recent workforce reduction, as well as higher depreciation, amortization and financing costs.
On Wall Street, shares of Apple were down more than 1 per cent in morning trading after the company’s sales forecast for the holiday quarter fell short of analysts’ expectations. Chief Financial Officer Luca Maestri told analysts on a conference call that sales for the current quarter, when Apple typically has its biggest sales of new iPhone models, will be similar to the previous year, Reuters reported. Wall Street was expecting a forecast for sales to rise 4.97 per cent to US$122.98-billion. Apple’s latest results were released after Thursday’s close.
Overseas, the pan-European STOXX 600 was up 0.53 per cent by afternoon. Britain’s FTSE 100 slid 0.08 per cent. Germany’s DAX and France’s CAC 40 advanced 0.81 per cent and 0.33 per cent, respectively.
In Asia, Hong Kong’s Hang Seng jumped 2.52 per cent. Markets in Japan were closed.
Crude prices edged higher in early trading but were still on track for weekly losses as concerns about China’s economy underpin demand worries.
The day range on Brent was US$86.67 to US$87.37 in the early premarket period. The range on West Texas Intermediate was US$82.36 to US$83.13.
Brent was down about 4 per cent for the week heading into Friday’s session while WTI was off about 3 per cent.
“With all the price whipsaws on high speed this week, it seems like oil traders are struggling for a locus point torn between tight markets and geopolitical risk against the backdrop of higher U.S. inventories, sluggish demand at the pump and fresh capex and better well-head technology in the Permian Basin,” Stephen Innes, managing partner with SPI Asset Management, said in a note.
Uncertainty about demand in China, one of the world’s top consumers of oil, has persisted this week after new figures showed the country’s manufacturing activity contracted in October. Reuters reported that the official purchasing managers’ index (PMI) fell to 49.5 in October from 50.2, dipping back below the 50-point level demarcating contraction from expansion. That data was released midweek.
On Friday, a private sector survey showed China’s services activity expanded at a slightly faster pace in October, but sales grew at the softest rate in 10 months and employment stagnated as business confidence waned, the news agency said.
In other commodities, spot gold was essentially flat at US$1,986.24 per ounce by early Friday morning and U.S. gold futures were little changed at US$1,994.00. Prices have fallen about 1 per cent this week so far after three consecutive weeks of gains.
“It seems investors are growing too optimistic that the Fed is done tightening rates, which has triggered a massive stock market rally,” OANDA senior analyst Ed Moya said in a recent note.
“Investors won’t be rushing to gold if Wall Street is confident that the Fed’s next move will be a rate cut in the middle of next year.”
The Canadian dollar was down modestly against its U.S. counterpart while its U.S. counterpart also remained on the backfoot against a basket of world currencies and looked set for a weekly decline.
The day range on the loonie was 72.66 US cents to 72.85 US cents in the early premarket period. The Canadian dollar was up nearly 1 per cent against the greenback over the past five days as of early Friday morning.
On world markets, the dollar index, which measures the U.S. currency against six rivals, was down 0.122 per cent at 106.07, not far from the one-week low of 105.80 it hit on Thursday, according to figures from Reuters. The index was down about 0.4 per cent for the week so far.
In other currencies, Britain’s pound was at $1.2198, down 0.02% on the day, having risen 0.4% on Thursday, and was on course for a 0.5% weekly gain, Reuters reported. The euro was up 0.05 per cent at US$1.0625, also set for a weekly gain of 0.5 per cent.
In bonds, the yield on the U.S. 10-year note was little changed at 4.668 per cent ahead of the North American opening bell.
More company news
Auto parts supplier Magna International raised its 2023 profit forecast on Friday, but flagged an impact from the United Auto Workers (UAW) union strike in North America. Magna expects full-year adjusted profit to be between US$1.55-billion and US$1.65-billion, compared with its prior forecast range of US$1.4-billion to US$1.6-billion. The company also raised its forecast assumption for light vehicle production in Europe and China but retained its prior assumption for North America. -Reuters
Enbridge on Friday beat third-quarter profit estimates, helped by higher volumes of oil transported through its system. The company posted an adjusted profit of 62 cents per share for the quarter ended Sept. 30, compared with the average estimate of 60 cents per share, according to LSEG data. -Reuters
(8:30 a.m. ET) Canadian employment for October.
(8:30 a.m. ET) U.S. nonfarm payrolls for October.
(9:45 a.m. ET) U.S. S&P global services and composite PMI for October.
(10 a.m. ET) U.S. ISM services PMI for October.
With Reuters and The Canadian Press