The Week in Review

Weekly Market Recap: U.S. and Canada

As I cover in a story below, concerns over the Middle East are affecting oil prices, although perhaps not as much as we might expect. This was enough, though, to lift the TSX by almost 1%, the top gaining index of the four we track regularly in this newsletter. Positive US employment news gave a boost to the U.S. indices and we saw the S&P 500 finish the week up .22%, the Dow Jones gained .19% and the Nasdaq rose .13%.

S&P 500 Returns | Week At-a-Glance

TSX Returns | Week At-a-Glance

Major Economic Stories This Week

Job were once again front and center in this week’s economic news. We had some stronger than expected results from the U.S., but there are signs that more economic challenges may by just around the corner.

Here’s how it all played out.

US Unemployment Rate Drops to 4.1%

The unemployment rate in the United States fell to 4.1% in September, the lowest in three months, beating market expectations which were predicting an unchanged rate.

The number of unemployed decreased, while employment levels rose significantly, showing some new strength in the labor market.

• Unemployment rate: 4.1% (down from 4.2%)

• Employment increased by 430,000 to 161.864 million.

• Labor force participation rate steady at 62.7%.

• Employment-population ratio rose to 60.2%.

US Economy Adds 254,000 Jobs in September, Beating Expectations

The US added 254,000 jobs in September, the strongest growth in six months and well above expectations.

Key sectors like food services, health care, and government contributed to the gains, while manufacturing saw a decline. Employment numbers for July and August were revised upward, indicating a more robust job market than initially reported. 

• Jobs added: 254,000 (forecast was 140,000).

• Employment gains in food services (+69K), health care (+45K), and government (+31K).

• Payroll figures for July and August revised upward by 72,000.

• Manufacturing employment declined by 7,000.

US Job Openings Rise to 8.04 Million

The number of job openings increased to 8.04 million in August, again, another indication of high demand for labor across various industries.

While job openings rose in construction and government sectors, they fell in other services. Job quits dropped to the lowest level since August 2020. 

• Job openings increased by 329,000 to 8.04 million.

• Major increases in construction (+138,000) and state/local government (+78,000).

• Job quits fell to 3.084 million, the lowest since August 2020.

• Regional openings grew across all regions, notably in the Midwest (+132,000).

ISM Manufacturing PMI Stays at 47.2, Indicating Contraction

The ISM Manufacturing PMI remained unchanged at 47.2 in September, continuing the contraction in the manufacturing sector for six consecutive months.

 Weak demand, stalled production, and declining new orders contributed to the slowdown. 

• ISM Manufacturing PMI: 47.2 (indicating contraction).

• New orders fell to 46.1, inventories decreased to 43.9.

• Production nearly stalled at 49.8.

• Prices eased to 48.3, while supplier deliveries slowed (52.2).

Key Takeaways From this Week’s Economic News

US Unemployment Rate Drops to 4.1%

There has been a lot of mixed data coming out of the U.S. labour market recently, but I see this drop in the unemployment rate as a clear sign of a strong job market. Businesses are obviously feeling confident enough to hire, which is great news. The steady labor force participation rate also tells me that people are actively looking for work, and with employment on the rise, it seems like many are finding it. But here's the catch – with unemployment this low, the Federal Reserve might start to worry about the economy overheating. Although extremely unlikely, this is a scenario that could see the Fed decide to keep interest rates at current rates or at a minimum, slow the pace of the rate cuts that we’re all pricing in.

 US Economy Adds 254,000 Jobs

In another unexpected twist in the U.S. labour market story, I’m pretty impressed with the job gains this month, especially since they’re the strongest in six months. It’s not just the number of jobs added; it’s where they’re happening. Sectors like food services and health care show that people are spending again, which is a good indicator of economic health. On the flip side, the drop in manufacturing jobs does make me a bit cautious. Manufacturing is a key part of the economy, (see the PMI numbers above) so seeing declines there could mean trouble ahead. No doubt though, the upward revisions for the past two months do show that the job market is more resilient than we thought.

US Job Openings Rise to 8.04 Million

Staying on the topic of jobs, the surge in job openings is another sign of strong labor demand, and it could lead to some wage growth if companies start competing to attract workers. What really catches my eye is how this increase is happening across all regions, particularly in the Midwest, which suggests the economy is picking up broadly, not just in a few hot spots. But make note of the job quits, now at their lowest since 2020. This makes me think people are feeling a bit cautious. Even with more job openings, if workers aren’t quitting as much, they might be sensing some uncertainty in the market or in their own job security.

THIS WEEK’S POLL QUESTION
(Results in Next Week’s Newsletter)

Comments of the Week

✅ Yes, They Will

Technology wise, yes, they are close to it. The long list of compliance issues and stupid people walking\driving where ever they please will however be the biggest hurdle. Every accident will become, by default, the fault of technology. - aelaan

They have push hard for this and we will the saving grace for this quarter for Tesla . Anything less than success will hurt Tesla. - connletterio

❌ No, They Won’t

From an investment standpoint, I was admittedly wrong from the beginning on Tesla. I may be wrong again, but Tesla's FSD has been underwhelming and oversold my Musk & his team for years. I have no faith that they'll deliver, but I've been proven wrong before. - callawayguy

From what I have been reading, Tesla has had many problems with their self driving software. If the bugs in the software have not been ironed out, I don't see how they would be able to move forward. Maybe I am just to skeptical. - entender1012

REAL ESTATE
Competition Bureau Investigates CREA: What It Means for Canadians

• Bureau questions CREA’s commission rules for potential anti-competitive practices.

• Smaller brokerages and alternative listing services might be at a disadvantage.

• No conclusions yet, but changes could impact home buying and selling.

• More competition might mean lower commission rates.

The Competition Bureau is digging into the Canadian Real Estate Association (CREA) to see if their rules make it tougher for realtors to offer lower commissions and if they limit competition. CREA, with over 160,000 members, is being asked to provide documents for this investigation. The Bureau is looking to see if CREA's practices unfairly benefit larger brokerages over smaller ones and alternative listing services.

It’s important to point out that for now at least there’s no conclusion of wrongdoing, and CREA says it’s cooperating fully, calling its policies “pro-competitive and pro-consumer.” But this inquiry could lead to some major changes in the real estate market.

Why Is This Happening?

A big part of the investigation focuses on CREA's commission rules. When homes are listed on the MLS system, they must include an offer for the buyer’s agent’s commission. The Bureau thinks this might discourage realtors from lowering fees and may steer buyers away from properties with lower commissions. They’re also looking into CREA’s 2024 cooperation policy, which requires listings to hit the MLS system within three days of being publicly marketed. This could disadvantage smaller or alternative listing services.

How Could This Affect Canadians?

For the average Canadian, the outcome of this could mean more choices when buying or selling a home. If the Bureau finds that CREA's rules limit competition, it might open the door for more alternative services and potentially lower commission rates. However, there could be some short-term market uncertainty if changes are enforced.

In the meantime, the Bureau is asking Canadians to share their experiences with real estate commissions and CREA’s policies. So, if you’ve had a good or bad experience, now’s the time to speak up! Your feedback could play a role in shaping the future of real estate in Canada.

IN PARTNERSHIP WITH BMO ETFs

Unlocking the Power of New BMO ETF Tools!

Have you ever found yourself wanting to compare ETFs side by side? Maybe you’re ready to get technical, screening them by volatility or other key factors? Or perhaps you’ve got a single stock you love, but you’re considering some diversification! Well, my friends, look no further!

As we mentioned last month, BMO Exchange Traded Funds recently launched eight brand-new Investing Tools! These tools were built to streamline your decision- making, and help you invest with more confidence.

Although there are eight new tools to choose from, this week – I’d like to drill down on a few of our favorites!

 ETF Comparison Tool: Find the Best ETF for You

Comparing ETFs and Mutual Funds just got easier! With the ETF Fund Comparison Tool, you can quickly stack up your favorite ETFs or funds side by side. Compare fees, performance, holdings, and more—all in one place. This tool was designed to help you decide which ETF suits your goals.

 ETF Screener: Getting Your Research Done

Need help finding an ETF? With BMO’s ETF Screener, you can filter through the investable universe of Canadian ETFs in seconds. Whether you’re searching by sector, asset class, or even risk level, this tool does the heavy lifting. Want to invest in tech or dividends? Use the screener to narrow it down and find your ideal ETF match!

ETF Stock Replacement Tool: Your Diversification Friend  

Love a stock but want to diversify? BMO’s ETF Stock Replacement to ETFs Tool shows you ETFs with significant holdings in your favorite stocks! If you’re a fan of holding individual stocks this tool was built to help investors identify the weight of their favorite (or least favorite) stocks within ETFs.

For example, say you LOVE Nvidia, but wanted to trim your position size. Here you can enter the stock, chose your filter, and sort by all providers, or BMO ETFs.

 With tools like these, investing just got a lot more efficient, and dare I say, fun?

Dive in and give them a try here!

Disclaimer
This content is sponsored by BMO Exchange Traded Funds. This content has been prepared by Beavis Wealth and represents its assessment at the time of publication. Beavis Wealth is compensated under this arrangement by BMO Exchange Traded Funds.
Please visit http://www.bmoetfs.com/ to learn more.
This content is sponsored by BMO Exchange Traded Funds. This content has been prepared by Beavis Wealth and represents its assessment at the time of publication. Beavis Wealth is compensated under this arrangement by BMO Exchange Traded Funds.
Click here for the full disclaimer: https://thehub.bmosalessupport.com/system/files/Beavis%20Wealth_Newsletter_Partnership_Disclaimer.pdf 

HOUSING
Buying a Home May Stay Out of Reach for Many Canadians

• High home prices and weak spending power keep housing unaffordable.

• Even with lower interest rates, mortgage costs remain high.

• Toronto and Vancouver remain particularly challenging markets.

• Recent rule changes may help, but not enough for most buyers..

Sticking with the real estate theme for just a minute, even though there are hopes that falling interest rates might ease the housing crunch, buying a home is still out of reach for many Canadians. The Bank of Canada is expected to keep cutting rates, but experts say that’s not enough to offset rising home prices and limited spending power. Tony Stillo from Oxford Economics says affordability might not return for at least a decade.

Not surprisingly, the issue has also become a political hot topic, putting pressure on Prime Minister Trudeau’s government, which faces an election by 2025. The Conservatives have been eager to highlight the housing crisis as they aim to challenge Trudeau’s nine-year leadership.

Interest Rates Down, But Prices Are Still Too High

Interest rates started dropping in June, and the five-year fixed mortgage rate now sits around 4.75%, down 150 basis points from last year. Even with that, though, so far the drop hasn’t led to a material rise in home-buying. Robert Hogue of RBC says that a $50 or $100 monthly savings still isn’t enough to make homes affordable for most buyers. In pricey markets like Toronto and Vancouver, many remain priced out.

Since April 2020, Canadian home prices have jumped over 30%, while monthly mortgage payments are still 40% higher than in January 2020. For things to get back to pre-pandemic levels, prices would need to fall by 10% and mortgage rates would need to be cut in half. How many of us see that happening?

Will Recent Rule Changes Help?

The government recently adjusted mortgage rules, allowing first-time and new-home buyers to take loans with 30-year amortizations instead of 25 years to lower monthly payments. [See a Full Report on our YouTube Channel]

Critics, though, argue this could drive demand and push prices even higher. Finance Minister Chrystia Freeland disagrees, saying the move aims to encourage more home construction to meet demand. Still, with record-high immigration fueling demand, housing is likely to remain a challenge for most Canadians in the near future.

ENERGY SECTOR
Could $100 Oil Be the October Surprise No One Wanted?

• Middle East tensions could disrupt oil supply and prices.

• The market is calm now but could change fast.

• Oil price spikes could hit global and Canadian economies.

• Gas prices could surge, affecting everyday Canadians.

Even though we’re seeing chaos in the Middle East, oil prices have remained surprisingly stable. Usually with these types of geo-economic events going on we’d see a spike, but investors seem to be waiting for clearer signs of supply disruptions before reacting.

Bob McNally from Rapidan Energy Group says, “It’s hard to overstate how complacent the oil markets have become.” Prices right now are still closer to their lows for 2024, which is unusual given past reactions to geopolitical conflicts.

What Could Change?

Experts are now warning that the calm could be short-lived. If Israel retaliates against Iran’s energy facilities, oil prices could skyrocket. Helima Croft from RBC Capital Markets points out that a situation like the 2019 attacks on Saudi oil facilities, which were linked to Iran, could severely impact the global oil supply. She says that “Pre-shale revolution, this type of situation would have sent prices well above $100.

The real worry? As always seems to the be case in situations like this, the focus has turned to the Strait of Hormuz, a narrow passage where a large chunk of the world’s oil flows through. If things get messy there, prices could surge past $100 a barrel.

How This Could Affect Canadians

For Canadians, a big jump in oil prices could mean higher gas prices which then leads to increased costs for goods and services. I suppose we could look at the positive side of this; a boost Canada’s oil industry. But it could also lead to inflation and economic uncertainty, impacting consumer spending and investment. If tensions escalate, ClearView Energy Partners estimate oil prices could jump from $74 to $86 per barrel, or even more if the Strait of Hormuz is affected, as I just noted.

Although analysts at Citi are saying such events are unlikely, any price spike could have a short-term impact, especially with an election around the corner in the U.S. We all know that the price of gas at the pump has been an issue for the past few years, and as Kevin Book from ClearView puts it, that issue along could have an impact on the final election outcome.

AVIATION
Competition Bureau Targets Air Canada and WestJet

• Competition Bureau demands market info from Air Canada and WestJet.

• Study focuses on airline competition, barriers, and pricing.

• First use of new information-gathering powers by the Bureau.

• Possible recommendations to improve Canadian air travel.

The Competition Bureau is keeping busy these days, and in addition to the CREA investigation noted above, it’s also cracking down on Canada’s two biggest airlines, Air Canada and WestJet, to get a closer look at airline competition. Last month, the Federal Court granted orders requiring both airlines to hand over records and answer questions on topics like barriers to entry, performance metrics, and agreements with airports. The Bureau wants to understand how the domestic airline market works, as Air Canada and WestJet controlled about three-quarters of the market last year.

This move is part of a market study the Bureau launched in July due to ongoing concerns about high prices and quality of air travel in Canada. It’s also the first time the regulator is using its new powers to gather information since changes to federal legislation came into effect in June.

What Are They Looking At?

The Bureau is focusing in on competition between airlines, the challenges new carriers face entering the market, and what makes it tough for travelers to make informed choices. Commissioner Matthew Boswell said many Canadians are frustrated with the cost and quality of air travel and hopes the study will lead to recommendations for improvement. Last year, about one-third of flights were delayed—better than in 2022 but still worse than pre-pandemic levels.

What Could This Mean for Canadians?

While this isn’t an investigation into any specific wrongdoing, the Bureau says if it finds evidence of illegal activity, it will take action. With passenger complaints hitting a high of 78,000 last month, (I find that number mind-blowing, honestly) leading to two-year wait times for resolutions, this study could lead to much-needed changes in the industry. If the Bureau recommends solutions, it might result in better pricing, more competition, and improved service for Canadians. For now, it's a waiting game to see what information comes out and how it might impact air travel moving forward.

OTHER NEWS FROM THE PAST WEEK

Howard Schultz Violated Labor Law
Former Starbucks CEO Howard Schultz violated federal labor law by telling a barista unhappy with working conditions to "go work for another company." The NLRB ruled Schultz’s comments as coercive threats.

Zuckerberg Now World's Second-Richest
Meta CEO Mark Zuckerberg has surpassed Jeff Bezos as the world's second-richest person, with a net worth of $206.2 billion. Zuckerberg's wealth soared due to Meta's consistently high quarterly earnings.

Mark Cuban’s Lifetime Flight Pass Purchase
After selling his first company in 1990, a drunken Mark Cuban bought a lifetime flight pass from American Airlines for $125,000. He used it freely, even transferring it to his dad and then a friend.

Google Wins €1.49 Billion EU Antitrust Battle
Google overturned a €1.49 billion EU fine over its AdSense practices. The court ruled that the EU’s evidence was insufficient, though Google’s broader legal troubles in Europe may not be over yet.

Credit Card Debt Rising for Canadian Renters
Canadian renters are increasingly relying on credit cards due to high rent and living costs. Financial counseling, relief programs, and better financial literacy could help address this nationwide issue.

Market Movers

Top 10 Weekly Gainers

Top 10 Weekly Losers

10 Most Overbought Stocks

10 Most Oversold Stocks

The Relative Strength Indicator (RSI) can provide a signal that suggest a stock is either overbought or oversold.
📈A stock that has an RSI over 70 is considered to be in “overbought” territory. This might suggest that the stock is due for a pullback, however it is not a recommendation to sell.
📉A stock that is trading with an RSI below 30 is considered to be in “oversold” territory. This might suggest that the stock is due for a recovery, however it is not a recommendation to buy. Always perform your own due diligence.

Visit our YouTube Channel
Sign up for Pulse (Free)
Our Website
Comments and Feedback