“The biggest problem is not to let people accept new ideas, but to let them forget the old ones” — John Maynard Keynes
TSX Rises, Jobs Growth Keeps Rate Hike Door Open
The Toronto Stock Exchange’s S&P/TSX composite index closed at 15,257.97, up 0.43%, or 66.01 points on Friday. The Friday closing number represents a 0.85% increase on last week’s finishing mark of 15,128.65.
Decreased energy shipments pulled Canadian exports down in June, further widening the trade gap; however, strong and sustained jobs growth is keeping the door open for further rate hikes in 2017. The export numbers, however, did weigh on the Loonie on the way to a close of 79.02 cents U.S., down .39 of a cent.
Gold futures dropped 1.1% to $1,254.5 per ounce, which weighed on Gold miners both north and south of the 49th.
Crude oil rose by 49 cents (USD) to close at $49.52 per barrel, although the data showed strong U.S. output and rising OPEC output which might usually lead to a drop in oil pricing.
Strong U.S. Jobs Report for July & Notes on Earnings Season
The non-farm payrolls number increased in July by 209,000 jobs, beating the street expectations of 183,000 jobs. In addition, the June jobs numbers were revised upward, from 222,000 jobs to 231,000 jobs.
U.S. unemployment dropped to 4.3%, although it should be noted that “unemployment” figures do not count employable people who are not actively looking, or who have been actively looking for over a year. Still, 4.3% is a respectable figure.
The potential knock-on effect of the strong jobs figures was felt as analysts increased the odds of a December rate hike from 46% to 50%. The Federal Reserve may also consider shrinking its $4.5 Trillion bond portfolio starting in September.
Although the S&P 500 is currently trading at 18 times expected earnings (the 10-year average is 14 times earnings), the strong earnings season has partially mitigated fears of over-valuation. The S&P 500 closed Friday at 2,476.83, a modest increase of 4.67 points, or 0.19%.
The Dow Jones Industrial Average (DJIA) rose above 22,000 for the first time ever on Wednesday, amidst hitting record highs for 8 straight days as of Friday. The DJIA closed Friday at 22,082.12.
Sources: Thomson Reuters DataStream, Globe Advisor