Weekly Market Update (June 19 – 23, 2017)

June 26, 2017

In a mostly uneventful week on the economic data front, crude oil prices dropped over 5% before stabilizing and recovering slightly by week’s end. Oil (WTI) slipped as low as $42.20 a barrel, its lowest level since November, as relentless supply gains in the U.S. and renewed output from Libya continued to thwart OPEC-led efforts to boost prices. Having tumbled by 20% so far in 2017, the price of oil is tracking to its worst first-half performance since 1997.

In equity markets, oil’s damage has been mostly contained to energy stocks, with some minor spillover to industrials and materials. The energy sector in both Canada’s S&P/TSX Composite and the U.S.’ S&P 500 indexes is down almost 15% year-to-date, easily the worst-performing sector.

The S&P/TSX managed a gain of +0.84% for the week, despite the energy sector decline, as high-profile investors showed interest in select Canadian issuers. First, activist investor Land & Buildings Investment Management took aim at Hudson’s Bay Co., boosting the retailer’s stock 27%. Billionaire John Paulson joined the board of Valeant Pharmaceuticals, sparking a 24% gain for its shares and pushing the TSX health care sector to the top of the week’s sector leaderboard with a gain of 12.9%. And news of Warren Buffet’s Berkshire Hathaway buying into Home Capital Group helped Home Capital’s shares to a 30% gain. The Canadian dollar struggled through mid-week with falling oil prices. After mostly recovering on a stronger-than-expected April retail sales report and the Buffet-Home Capital move, which helped quell concerns about the Canadian housing market, it dipped again when Friday’s softer-than expected Consumer Price Index stifled talk of an early Bank of Canada interest rate hike. The Loonie closed the week down 0.40%.

In U.S. equities, both the Dow Jones Industrial and the S&P 500 Composite Indexes once again edged to new all-time highs, finishing the week up 0.05% and 0.21% respectively, although of 11 S&P sectors only two – health care and technology – finished the week in the green. Biotechnology enjoyed a particularly strong rally as political threats around drug pricing faded. Mega-cap technology stocks, which suffered weakness earlier this month, reasserted their strength and led the information technology sector to a chart-topping year-to-date gain of 19% (but after this week’s 3.7% jump, health care leads the year’s advance on an equal-weighted basis). Both sectors are benefiting from the rotation out of energy.

In the U.K., the FTSE 100 fell and the pound came under pressure as Brexit negotiations began, concerns continued to swirl around the durability of Prime Minister May’s leadership of Parliament, and Bank of England Governor Carney threw cold water on last week’s speculation about interest rate hikes later this year. Asian shares broadly advanced, led by Hong Kong and Shanghai, as MSCI announced its decision to add China-A shares to its emerging markets index.

What’s ahead next week:

Canada

  • GDP
  • Raw Materials and Industrial Products Prices
  • BoC Senior Loan Officer Survey

U.S.

  • Durable Goods Orders
  • Consumer Confidence (Conference Board) & Consumer Sentiment (U. of Mich.)
  • Inventories
  • Pending Home Sales
  • GDP
  • Personal Income and Spending
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