Stocks are moving higher this morning as a rally in tech shares boosted sentiment and helped markets recover some recent losses. Tech will remain in focus as investors await Meta’s earnings, set to be released after markets close today. Given signs that the Fed is in no rush to cut interest rates soon, investors have been putting extra attention on corporate earnings in hopes that will help equities recover. Given that, investors should take comfort that earnings season has been off to a solid start with 75% of companies who have posted results exceeding expectations.
Maybe all of those rate hikes are doing their job. Canadian retail sales remained stagnant in March, according to an advance estimate from Stats Canada, following a 0.1% decline in February and a 0.3% drop in January. The decline marks the weakest quarterly performance since the second quarter of 2023 and signaling that consumers are tightening their belts more as borrowing costs remain elevated. February’s decline was attributed to lower sales at gas stations, while core retail sales remained unchanged, indicating reduced spending on discretionary items like clothing and sporting goods. Excluding automobile sales, retail sales fell by 0.3% in volume terms, with declines observed in seven provinces, particularly in Alberta and major cities like Toronto and Montreal.
U.S. business activity expanded at its slowest pace this year, with the S&P Global flash PMI index decreasing to 50.9, indicating a pullback in demand and leading to the first decline in employment since 2020. Orders contracted for the first time in six months, while the composite index of prices received declined from a 10-month high. The slowdown was evident across sectors, with new business at service providers shrinking for the first time since October. This challenging business environment prompted companies to cut payroll numbers at a rate not seen since the global financial crisis, suggesting that firms perceive current capacity as sufficient to handle demand. Overall, while the manufacturing PMI showed a slight contraction, the decline in employment and new business indicators suggest a more subdued economic outlook for the coming months.
On the other side of the economic picture, sales of new homes in the U.S. rose 8.8% in March on an annual basis, the fastest pace since September. Higher sales was seen across all regions, driven in part by a significant increase in inventory, with the supply of new homes reaching its highest level since 2008. With this increase in supply, the median sales price of new houses decreased by 1.9% from the previous year, reflecting efforts by builders to offer incentives such as price reductions and mortgage rate buy-downs. While underlying demand remains strong, challenges such as high mortgage rates and prices continue to constrain the housing market’s momentum. Still, the surge in new-home sales is expected to contribute significantly to U.S. economic growth in the first quarter which we will see tomorrow when U.S. GDP numbers are released.
The Bank of England’s Monetary Policy Committee is showing division regarding the timing of potential rate cuts, with more members adopting a cautious stance due to lingering inflation concerns. This contrasts with earlier market expectations, which had priced in up to six 25 bps cuts at the beginning of the year (the change in rate cut expectations sounds familiar). Despite speculation about possible rate cuts to stimulate economic growth, investors have been adjusting their expectations in response to recent hawkish comments and higher than forecast inflation data in the UK. Committee members have emphasized a relatively cautious approach to rate moves, cautioning that easing too early carries greater risks than easing too late. The differing views reflect broader uncertainties about the strength of the UK economy, inflationary pressures, and the appropriate timing of policy adjustments.
What will the kids (and some adults) do?! The US Senate approved a bill that could see TikTok banned in America over national security fears. It gives TikTok’s Chinese owner, ByteDance, nine months to sell its stake or the app will be blocked in the United States. The bill is now in the hands of US President Joe Biden, who plans to sign it today starting a 270-day countdown for the sale or a US prohibition of the popular video-sharing platform. TikTok and Beijing-based ByteDance Ltd. will be doing all they can to stop the measure arguing that it infringes on the free-speech rights of the app’s 170 million monthly US users and plan to file suits to void the law or at least delay its enforcement.
A man in Belgian was acquitted of driving under the influence of alcohol due to having auto-brewery syndrome (ABS), an extremely rare condition where the body produces alcohol. Not helping his case is the fact that the man happens to work at a brewery. Despite this, three doctors independently confirmed his ABS diagnosis and the judge emphasized in the verdict that the defendant did not exhibit symptoms of intoxication. Symptoms of ABS can resemble alcohol intoxication, including slurred speech, stumbling, loss of motor functions, and dizziness, although those with ABS often experience fewer effects compared to those who consume alcoholic beverages. Maybe he should take the bus going forward.
Diversion: Over served…
