Daily market snapshot

• Stocks close higher – The TSX and major U.S. equity markets rose on Tuesday, with the S&P 500 and Nasdaq reaching record highs. Sector performance was mostly lower, as communication services, technology and consumer discretionary stocks led the broader market higher. In global markets, Asia was up, as South Korea and Taiwan technology stocks rallied on new U.S. restrictions on artificial intelligence (AI) chips and components to China. Markets will be focused on the political tension in South Korea, where the president instituted martial law, then subsequently withdrew the declaration. The U.S. dollar dropped versus major currencies. In the commodity space, WTI oil and gold traded higher*.
• Job openings higher than expected – U.S. job openings rose to 7.7 million in October, above estimates and the prior month's figure, both of which were about 7.4 million. The number of people voluntarily leaving their jobs (quits) also increased to 3.3 million, typically indicating confidence in employment prospects, while layoffs were little changed**. These readings reflect a healthy labour market, which should be supportive of consumer spending going into the shortened holiday shopping season and the soft-landing narrative for the economy, in our view. Total nonfarm payrolls will provide a deeper look at the labour market on Friday, with forecasts calling for 215,000 jobs created in November, up from just 12,000 that was impacted by weather and labour strikes in October. The unemployment rate is expected to hold steady at 4.1%*.
• Bond yields tick up - Bond yields rose, with the 10-year Government of Canada yield at 3.1% and the 10-year U.S. Treasury yield at 4.22%. Treasury yields added to their broader trend higher in recent months. Bond markets have reduced expectations for Federal Reserve (Fed) easing to a slower and shallower path as the moderation in inflation has slowed. Markets are currently pricing in three additional Fed interest-rate cuts over the next seven months, which would put the fed funds rate in the 3.75% - 4.0% range. We expect the Bank of Canada and the Fed to continue cutting rates to move toward a more neutral stance, which should support continued economic expansion.

Brian Therien, CFA
Investment Strategy

^{Source: *FactSet ** U.S. Bureau of Labor Statistics}

• Stocks start the month mixed – The TSX closed lower, while major U.S. equity markets were up on Monday, with large-cap stocks leading small- and mid-cap stocks. Sector performance was mixed, as communication services and consumer discretionary stocks posted the largest gains. In global markets, Asia was up on China's manufacturing purchasing managers index (PMI) for November rising to 51.5, reflecting expansion and beating estimates calling for 50.5*. Europe was also higher, as the eurozone unemployment rate for October held steady at 6.3%, as expected. Bond yields were also mixed, with the 10-year Government of Canada yield down to 3.07% and the 10-year U.S. Treasury yield up to 4.19%. The U.S. dollar advanced versus major currencies. In the commodity space, WTI oil traded higher, while gold was down*.
• Market to focus on the labour market this week – U.S. job openings will be released on Tuesday, with estimates pointing to a modest decline to 7.42 million in October, down from 7.44 million the prior month. Job openings have remained higher than total unemployment of about 7.0 million, although the excess has been steadily narrowing**. Total nonfarm payrolls for the U.S. will be released on Friday, with forecasts calling for 200,000 in November, up from just 12,000 that was impacted by weather and labor strikes in October. The unemployment rate is expected to tick up to 4.2%, from 4.1%*. These forecasts, if realized, reflect a resilient labour market that is gradually cooling, which is supportive of continued moderation in inflation and the soft-landing narrative, in our view.
• Manufacturing readings beat estimates – The Markit Manufacturing Purchasing Managers' Index (PMI) rose to 49.7 in November, above forecasts calling for 48.8. The Institute for Supply Management (ISM) Manufacturing Index also rose to 48.4 November, beating estimates pointing to 47.5. PMI and ISM are diffusion indexes, with readings above 50.0 reflecting expansion. While both readings still reflect modest contraction, the trend has improved in recent months, which is supportive of resilient economic growth, in our view.

Brian Therien, CFA
Investment Strategy

^{Source: *FactSet ** U.S. Bureau of Labor Statistics}

• Stocks finish higher, capping a strong month: Equity markets finished higher on Friday and capped off a strong month of performance, with the TSX and S&P 500 higher by roughly 6% in November.* Leadership was broad-based today, with most sectors of the S&P 500 finishing higher, led by information technology and consumer discretionary.* Overseas, Asian markets were mixed overnight, while European markets were mostly higher following a lower-than-expected eurozone inflation report.* On the economic front, domestic real GDP grew at a 1% annualized pace in the third quarter, modestly below expectations for a 1.1% gain.* Bond yields finished lower, with the 10-year GoC yield falling to around the 3.14% mark, while the 10-year U.S. Treasury yield closed around 4.19%.* In the commodity space, oil prices ended lower, with WTI crude oil just below $69 per barrel, while gold was up roughly 0.7%.*
• Third-quarter GDP slightly below expectations: The first estimate of third-quarter real GDP showed the Canadian economy grew at a 1% annualized rate in the third quarter, slightly below expectations of growth for 1.1%.* Today's reading is a step down of the 2%-plus growth rates achieved in the first two quarters of the year, but nonetheless represents improvement from 2023 when GDP grew by less than 1% in each of the final three quarters of the year.* Looking into the drivers of growth in the third quarter, household spending rose by a strong 3.5% annualized rate, the highest since the first quarter of 2023.* Additionally, household spending per capita rose at a 1% annualized clip after declining in six of the previous eight quarters.* Weakness in business investment, inventories and net trade were factors that weighed on growth in the third quarter. With household consumption growing at a healthy clip, we'd view today's report as stronger than the headline number suggests.
• Busy economic week ahead: The week ahead will be a busy one from an economic perspective. We'll get a read on U.S. economic activity with the release of the ISM services and manufacturing PMI's, as well as a look into recent labour-market trends, with all eyes focused on Friday's domestic labour-force survey and U.S. nonfarm-payroll report for November. On the growth front, the ISM manufacturing PMI is expected to improve to 48 but remain in contraction (reading below 50), while the ISM services PMI is expected to remain well into expansion at 55.4.* Turning to the labour market, expectations are for domestic employment to grow by 20,000 in November, while the unemployment rate is expected to tick higher to 6.7%.* In the U.S., nonfarm payrolls are expected to rise by 200,000, well above the prior months 12,000 gain, which was negatively impacted by the Boeing machinist strike and hurricanes Helene and Milton.* The U.S. unemployment rate is expected to tick higher to 4.2%, up from 4.1% in October.* We expect labour-market conditions to remain healthy over the coming year, providing support to consumer spending and helping to extend the economic expansion.  

Brock Weimer, CFA
Associate Analyst

^*FactSet

U.S. Thanksgiving Holiday

Wednesday, 11/27/2024 p.m.

• Stocks finish mixed: Major equity markets finished mixed on Wednesday with the TSX closing modestly higher while the S&P 500 fell by roughly 0.4%.* Real estate and health care were the top performing sectors of the S&P 500 while technology was a laggard following mixed earnings results from Dell Technologies after the market close yesterday.* Overseas, European markets traded lower while Asian markets were mixed overnight with Japan's Nikkei logging a modest decline while equity markets in China were higher.* On the economic front, the second preliminary estimate for third-quarter U.S. GDP growth was in-line with expectations and unchanged from the initial estimate of 2.8%.* U.S. inflation data was in focus today as well with personal consumption expenditures (PCE) inflation in-line with expectations for both core and headline PCE. Bond yields finished lower with the 10-year GoC yield falling to 3.22% and the 10-year U.S. Treasury yield ticking down to 4.25%.*
• U.S. inflation data in-line with expectations: U.S. inflation data was back in focus today with the release of October personal consumption expenditures (PCE) inflation. Headline PCE rose by 0.2% in October and 2.3% over the past 12-months, both of which were in-line with expectations. Core PCE rose by 0.3% in October and 2.8% over the past 12-months, which were also both in-line with expectations. Markets are pricing in a 66% probability of another 0.25% rate cut at the Fed's December 18 meeting.*** In our view, another 0.25% cut in December is likely, however with the U.S. economy on strong footing and the potential for inflationary fiscal policy down the road, the Fed will likely take a more gradual approach to rate cuts in 2025.
• The past 12-months have seen strong returns across multiple asset classes: The past 12-months have seen above-average returns across a variety of different asset classes and regions, building on strong performance in 2023. Canadian large-cap stocks have gained roughly 30% over the past 12-months, well above the 20-year annualized growth rate of roughly 8%.** U.S. large-cap stocks have seen impressive returns as well, rising by more than 37% over the same time, while U.S. small- and mid-cap stocks have gained over 38%. Despite underperformance more recently, overseas stocks have managed healthy returns, with overseas developed large-cap stocks higher by roughly 14% and emerging-market stocks up roughly 17%.* Additionally, Canadian investment-grade bonds have posted a gain over 8% in the past 12-months despite a spike in yields more recently. While it will be difficult to replicate the strong performance of the past 12-months, we see broad leadership as a theme that continues to play out in the months ahead, emphasizing the importance of maintaining a well-diversified portfolio aligned to your long-term goals.

Brock Weimer, CFA 
Associate Analyst

^{*FactSet **Morningstar Direct. Total Return in CAD. ***CME FedWatch Tool}