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An average hurricane season produces 14 named storms and seven hurricanes. Out of the hurricanes, three usually strengthen into major storms with winds of at least 115 mph. The season’s first tropical cyclone will be named Arlene followed by Bret, Cindy, Don and Emily.
2023 Atlantic hurricane season guide: Here’s what to know about this year’s storms (foxweather.com)
North American stocks fell on Wednesday as a deal to raise the federal debt ceiling headed toward a crucial vote in Congress, while unexpectedly strong reports on the U.S. labour market and the Canadian economy rattled investors who feared more central bank rate hikes are on the way.
The House of Representatives is expected to vote in the evening on a bill to lift the $31.4 trillion debt limit, a critical step to avoid a destabilizing default that could come early next week without congressional approval.
House passage would send the bill to the Senate, where debate could stretch to the weekend, just before the June 5 date when the government could start to run out of money.
But most analysts foresee the bill’s approval and U.S. President Joe Biden said on Wednesday he expected the debt ceiling bill on his desk by next Monday.
“The bond market liked that there was some fiscal discipline and the equity market liked that it’s not going to hurt growth,” said Brad Conger, deputy chief investment officer at Hirtle Callaghan & Co in Conshohocken, Pennsylvania.
“I don’t think we could have asked for a better outcome.”
However, equity valuations are stretched considering interest rates are high, the economy is slowing and inflation needs to decline further, Conger said.
“Quite frankly, if we’re really slowing down, the market is not offering a free lunch,” he said. “It’s going to be a struggle if inflation is not perceived to be ebbing, which is where we are.”
The Labor Department reported that U.S. job openings unexpectedly rose in April, reflecting persistent labor market strength that suggests pressure on wages and inflation.
Futures traders raised to 70% the probability of a 25 basis points hike at the Fed’s June 13-14 policy meeting. But that likelihood fell to about 32% after comments by Fed officials who are leaning to what some call a “hawkish pause.”
Fed Governor and vice chair nominee Philip Jefferson said skipping a rate hike in two weeks would provide policymakers time to see more data before making a decision. Philadelphia Fed President Patrick Harker also said on Wednesday that for now he is inclined to support a “skip” in rate hikes.
“The recent economic data has not really favored a pause in rate hikes,” said Tim Ghriskey, chief investment strategist at Inverness Counsel in New York. “But we’ve had a number of Fed governors coming out this afternoon and saying a pause is either likely or certainly possible.”
The Labor Department’s closely watched May unemployment report, due on Friday, could decide whether a rate hike occurs.
The major indices pared some losses after the comments by Fed officials.
The Dow Jones Industrial Average fell 134.51 points, or 0.41%, to 32,908.27; the S&P 500 lost 25.69 points, or 0.61%, at 4,179.83; and the Nasdaq Composite dropped 82.14 points, or 0.63%, to 12,935.29.
For the month, the S&P 500 rose 0.26%, the Dow lost 0.3.48% and the Nasdaq gained 5.80%.
The Toronto Stock Exchange’s S&P/TSX composite index ended down 167.46 points, or 0.9%, at 19,572.24, its lowest closing level since March 24. For May, it lost 5.2%, its biggest monthly decline so far in 2023.
“The overriding theme remains inflation and interest rates,” said Michael Sprung, president at Sprung Investment Management.
“It certainly sounds like another increase in the U.S. would not be out of the question and that would put Canada in a position where it would have to follow suit.”
Separate data showed that Canada’s economy grew 3.1% in the first quarter, faster than expected, bolstering bets for another BoC rate hike.
“The one bright light is that you can pick up some pretty attractive yields right now, particularly on the financials and a number of the utilities,” Sprung said.
Heavily weighted financials fell 1.1%, with National Bank of Canada down 2.8% after the bank missed earnings estimates.
Energy lost 2% as weak economic data from top oil importer China pressured crude prices. U.S. crude oil futures settled nearly 2% lower at US$68.09 a barrel.
Shares of Centerra Gold Inc surged 9.8% after the bullion miner said it received an official approval for its Öksüt mine in Turkey.
Teck Resources Ltd shares gained 2.3% after a report saying that Glencore Plc was working on a potential improvement to its bid for the Canadian miner.
Technology-led gains have put the Nasdaq on track for its best performance in May since 2020.
The Federal Deposit Insurance Corporation said U.S. banks’ total deposits declined by a record 2.5% in the first quarter after two large bank failures.
The S&P 500 financial sector index fell 1.1%, with banks taking the brunt with a 2.0% slide.
Advance Auto Parts Inc plunged 35.0%, falling the most on the S&P 500, after the auto parts retailer cut its full-year forecasts.
Shares of other autoparts makers including Genuine Parts Co , Autozone and O’Reily Automotive fell 5.6%, 2.8% and 2.7%, respectfully.
Hewlett Packard Enterprise Co slipped 7.1% after missing Wall Street estimates for second-quarter revenue.
Nvidia Corp’s shares fell 5.7% a day after hitting a record high that briefly boosted its market value above $1 trillion on Tuesday, fueled by bets on the AI boom.
Intel Corp was the biggest gainer on the S&P 500, jumping 4.8% as the chipmaker said it was on track to hit the upper end of its second-quarter revenue forecast.
Intel has risen 14.7% in its biggest three-day rally since March 2009.
Declining issues outnumbered advancing ones on the NYSE by a 1.39-to-1 ratio; on Nasdaq, a 1.37-to-1 ratio favored decliners. The S&P 500 posted four new 52-week highs and 23 new lows; the Nasdaq Composite recorded 36 new highs and 182 new lows.
Reuters, Globe staff
Debt ceiling deal: House passes bill, sends to Senate (cnbc.com)
https://www.cnbc.com/2023/05/30/debt-ceiling-deal-updates.html
Canada’s main stock index slid on Tuesday to its lowest closing level in two months, with the energy sector among the biggest decliners in a broad-based slide as oil prices tumbled.
The S&P/TSX composite index ended down 228.25 points, or 1.1%, at 19,739.70, its lowest close since March 28. All 10 major sectors ended lower.
Wall Street shares were mixed as investors weighed prospects of a deal to lift the U.S. debt ceiling passing in Congress.
“Energy was one of the sectors that did well last year as many people thought that with what’s going on in Russia and Ukraine, prices would skyrocket,” said Allan Small, senior investment advisor at Allan Small Financial Group.
“But that was overdone and now what’s taken hold is this notion of a global growth slowdown.”
Data on Tuesday showed U.S. consumer confidence slipping to a six-month low. Canada sends about 75% of its exports to the United States, including commodities.
The Toronto market’s energy sector fell 2.1% as the price of oil settled 4.4% lower at $69.46 a barrel.
Oil prices fell as mixed messages from major producers clouded the supply outlook ahead of this weekend’s OPEC+ meeting.
The materials sector, which includes precious and base metals miners and fertilizer companies, lost 1.6% as copper prices fell, while heavily weighted financials were down 1.1%.
On Wall Street, the S&P 500 index closed essentially flat but remained near its highest level since August 2022, just above 4,200 points. The Dow Jones Industrial Average also was lower while the Nasdaq Composite rose. The S&P 500 and the Nasdaq were still set for monthly gains in May.
Over the weekend, U.S. President Joe Biden and Republican House of Representatives Speaker Kevin McCarthy agreed to temporarily suspend the debt ceiling and cap some federal spending.
On Tuesday, McCarthy said the deal should be “easy” for Republicans to vote for and was likely to pass, but some right-wing Republicans said they opposed the bipartisan deal.
“I would not be surprised if the first vote results in failure and they have to go back again,” said Sam Stovall, chief investment strategist at CFRA in New York. “But I firmly believe a debt ceiling agreement will be approved before the June 5 drop dead date.”
The House Rules Committee began to consider the 99-page bill, with the White House saying Biden talked to both progressive and moderate Democratic members of Congress.
Nvidia Corp pared gains after setting a record high. The company anticipates a surge in demand for its AI chips that power chatbot sensation ChatGPT and other applications.
The chipmaker rose 3.0% to close with a market cap of about US$991 billion, just shy of the elite club of six companies valued at $1 trillion or more.
“Nvidia is the poster child for AI at the moment,” said Thomas Hayes, chairman at Great Hill Capital LLC. “If this AI trend is real, the immediate demand is going to be in chips and computing power.”
Digital Realty rose 1.7% after surging 14.6% the prior two sessions on expectations data centers will benefit from AI computing.
Federal Reserve rate hikes to fight stubborn inflation are denting economic growth and corporate profits, leaving about 20 companies to drive a 10% total return for the S&P 500 so far this year, said Anthony Saglimbene, chief market strategist at Ameriprise Financial in Troy, Michigan.
“Getting the debt ceiling legislation signed into law is not going to take away the other overhangs that are still out there on the market,” he said, adding that the majority of stocks are essentially treading water this year.
“That’s more telling of this market environment than the actual index performance of these handful of tech stocks.”
The Philadelphia SE Semiconductor index closed 0.1% higher. During the session it rose as much as 2.8%, hitting its highest since February 2022.
Only three of the S&P 500′s 11 sectors were higher, while declining stocks outweighed advancing shares on both the S&P 500 and Nasdaq.
The Dow Jones Industrial Average fell 50.56 points, or 0.15%, to 33,042.78, the S&P 500 gained 0.07 points, or 0.00%, to 4,205.52 and the Nasdaq Composite added 41.74 points, or 0.32%, to 13,017.43.
Data showed U.S. consumer confidence rose more than expected in May, which could feed speculation that the Fed may hike rates more to fight inflation.
Futures traders assign a 65% chance of a 25 basis point rate hike at the end of Fed policymakers’ June 13-14 meeting.
The Labor Department’s closely watched unemployment report for May, due on Friday, should hint at how resilient the economy has been as higher rates crimp company credit lines.
Tesla shares advanced, extending Friday’s gains. CEO Elon Musk arrived in China’s capital Beijing for the first time in three years.
Declining issues outnumbered advancing ones on the NYSE by a 1.12-to-1 ratio; on Nasdaq, a 1.21-to-1 ratio favored decliners. The S&P 500 posted 20 new 52-week highs and 17 new lows; the Nasdaq Composite recorded 89 new highs and 121 new lows.
Reuters
The Canadian market ended notably lower on Tuesday due to widespread selling amid concerns about economic slowdown.
Investors also weighed the prospects of the debt ceiling deal getting the nod from the Congress.
The benchmark S&P/TSX Composite Index ended down 228.25 points or 1.14% at 19,739.70. The index touched a low of 19,708.37 around mid afternoon.
All the sectoral indices closed in negative territory. Weak crude oil prices triggered a sell-off in the energy sector. Shares from materials, healthcare, consumer, technology and financials sectors closed notably lower.
Nutrien (NTR.TO), West Fraser Timber (WFG.TO), CCL Industries (CCL.A.TO), Shopify Inc (SHOP.TO) and Canadian Natural Resources (CNQ.TO) lost 2 to 4%.
Kinaxis Inc (KXS.TO), Franco-Nevada Corporation (FNV.TO), George Weston (WN.TO), Waste Connections (WCN.TO) and Fairfax Financial Holdings (FFH.TO) ended lower by 1 to 1.6%.
Canadian Western Bank (CWB.TO), Atco (ACO.Y.TO), Descartes Systems Group (DSG.TO) and Boyd Group Services (BYD.TO) posted strong gains.
On the economic front, data released by Statistics Canada showed Canada recorded a current account deficit of C$ 6.2 billion in the first quarter of 2023, after posting a deficit of a downwardly revised C$ 8.1 billion in the previous period.
Mixed signals by major OPEC producers and their main allies have sparked volatility in oil prices ahead of an OPEC+ oil policy meeting set to take place this weekend.
Brent crude and U.S. West Texas Intermediate (WTI) futures ended last week over 1.5 per cent higher, but fell by over 1 per cent at 1047 GMT on Tuesday.
OPEC+, which groups the Organization of the Petroleum Exporting Countries with Russia and other allies, surprised the market on April 2 with further output cuts that pushed up the price of oil.
The group meets on June 4 in Vienna to discuss whether or not to further curtail production.
Here is what OPEC+ producers have said so far:
Saudi Arabian Energy Minister Prince Abdulaziz bin Salman, the de-facto leader of the Organization of Petroleum Exporting Countries (OPEC), gave another warning last week to speculators.
“Speculators, like in any market they are there to stay, I keep advising them that they will be ouching, they did ouch in April, I don’t have to show my cards I’m not a poker player … but I would just tell them watch out,” he told the Qatar Economic Forum organized by Bloomberg.
Tuesday’s comments by the prince were interpreted by some investors as a signal that OPEC+ could consider further output cuts.
On Wednesday, Russian President Vladimir Putin said oil prices were approaching “economically justified” levels, indicating there could be no immediate change to the group’s production policy.
Russian Deputy Prime Minister Alexander Novak said on Thursday he expected no new steps from OPEC+ in Vienna, Russian media reported.
“I don’t think that there will be any new steps, because just a month ago certain decisions were made regarding the voluntary reduction of oil production by some countries due to the fact that we saw the slow pace of global economic recovery,” Novak was quoted as saying by Izvestia newspaper.
Novak later added in a statement that OPEC+ would make a decision on what is best for the oil market.
Three sources with knowledge of current Russian thinking told Reuters last week Russia is leaning towards leaving oil production volumes unchanged.
Speaking to Reuters on May 12, Iraqi Oil Minister HayanAbdel-Ghani said there would be no further reduction in outputagreed by OPEC+ when it meets, saying that Iraq had not beenasked to make any additional cuts.
Iranian President Ebrahim Raisi told the secretary general of OPEC on Saturday that he hopes oil producers can calm the market, calling for the unity of OPEC members, Iranian media reported.
https://www.cnbc.com/2023/05/30/debt-ceiling-deal-updates.html
Leading crude exporter Saudi Arabia is maximizing refining profits by importing unprecedented amounts of cheap Russian diesel and in turn shipping record volumes to Singapore, where the fuel can achieve higher margins, shiptracking data shows.
Russia has had to divert the volumes it sold to Europe, previously its dominant product market, after the European Union banned oil product imports in February as part of its response to Moscow’s invasion of Ukraine.
That allowed state oil giant Saudi Aramco to increase its May imports to Singapore to record levels and cash in on better arbitrage netbacks in the east than Europe, driven by tighter Asian supply during the maintenance season, traders and analysts said.
“Diesel supply in Singapore is relatively tight due to regional refinery maintenance, while Middle East supplies are rising, which may create spot arbitrage opportunities for traders to move the cargoes (to Singapore),” Vortexa’s head of APAC analysis Serena Huang said.
Saudi Arabia will import up to 500,000 tonnes (3.7 million barrels) or more of Russian diesel in May, with most of it arriving at Ras Tanura, where one of Saudi Aramco’s refineries is located, two trading sources, Kpler and Refinitiv showed.
At the same time, diesel from Saudi Arabia arriving in Singapore is set to hit 400,000 tonnes – an unprecedented level, data from Refinitiv, Vortexa and two industry sources found. The sources asked for anonymity because they were not authorized to speak to the media.
The rise in Saudi supplies could replenish Singapore stocks as exports from northeast Asia fall during the refinery overhaul season between May and July, the sources added.
It is however unclear whether Saudi Arabia was storing some of its own production and shipping mostly Russian supplies via swap trades instead, since both are of typical diesel specifications.
Russian 10 ppm sulphur gasoil cargoes are traded at discounts of around $30 a barrel to free-on-board Middle East quotes, versus Asia’s spot premiums for the same grade at 16 cents a barrel to Singapore quotes, according to trade sources and Refinitiv data.
Globally, Saudi’s diesel exports in April hit an all-time high of around 3.7 million tonnes, Kpler data showed. Jizan refinery, solely owned by Aramco, had been expected to increase diesel exports when crude runs stabilize.
Aramco declined to comment.
FGE analyst Lu Yawen said more Middle East gasoil cargoes were heading east rather than west to Europe, where high inventories and weak economic growth have depressed prices.
Falling freight costs also aided the arbitrage flow, two other oil and shipping analysts said.
The cost to charter a Long Range (LR) vessel on the Middle East to Singapore route has dropped to slightly below $25 a tonne from around $34 a tonne in the last two months, they added. That is half the cost for the same ship to travel to Europe, they said.
Global diesel supplies have increased since the start of 2023, with China and the Middle East ramping up exports and as mild winter in Europe capped demand, helping to reduce prices.
Asia’s 10 ppm sulphur gasoil spot premiums and refining margins have fallen by more than $8 and $1.50 a barrel, respectively, in the last two months, Refinitiv Eikon data showed.
Additions to refinery capacity of 700,000 barrels a day expected this year will further pressure east-of-Suez gasoil margins, Energy Aspects said in a note. The capacity includes units that are ramping up and will come online later this year.
Monday May 29
U.S. and U.K. markets closed
Also: Alberta election
—
Tuesday May 30
Japan jobless rate
(8:30 a.m. ET) Canada’s current account balance for Q1.
(9 a.m. ET) U.S. S&P Corelogic Case-Shiller Home Price Index (20 city) for March. The Street is expects a flat result month-over-month and down 1.7 per cent year-over-year.
(9 a.m. ET) U.S. FHFA Home Price Index for March. Consensus is a rise of 0.2 per cent from February and up 2.9 per cent year-over-year.
(10 a.m. ET) U.S. Conference Board Consumer Confidence Index for May.
(10:30 a.m. ET) U.S. Dallas Fed Manufacturing Activity for May.
Earnings include: Canopy Growth Corp.; Hewlett Packard Enterprise Co.; HP Inc.
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Wednesday May 31
China manufacturing and services PMI
Japan retail sales and industrial production
Germany CPI and unemployment
(8:30 a.m. ET) Canada’s real GDP for Q1. The Street is projecting an annualized rate rise of 2.5 per cent.
(8:30 a.m. ET) Canada’s monthly real GDP for March. Consensus is a decline of 0.1 per cent.
(9:45 a.m. ET) U.S. Chicago PMI for May.
(10 a.m. ET) U.S. Job Openings and Labor Turnover Survey for April.
(2 p.m. ET) U.S. Beige Book released.
Earnings include: CAE Inc.; Champion Iron Ltd.; Descartes Systems Group Inc.; National Bank of Canada; Patriot Battery Metals Inc.; Salesforce Inc.
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Thursday June 1
Japan capital spending
Euro zone CPI and jobless rate
Germany retail sales
(8:15 a.m. ET) U.S. ADP National Employment Report for May. Estimate is a rise of 165,000 from May.
(8:30 a.m. ET) U.S. initial jobless claims for week of May 27. Estimate is 235,000, up 6,000 from the previous week.
(8:30 a.m. ET) U.S. productivity for Q1. Consensus is an annualized rate decline of 2.6 per cent with unit labour costs rising 6.2 per cent.
(9:30 a.m. ET) Canada’s S&P global manufacturing PMI for May.
(9:45 a.m. ET) U.S. S&P global manufacturing PMI for May.
(10 a.m. ET) U.S. ISM manufacturing PMI for May.
(10 a.m. ET) U.S. construction spending for April.
Also: Canadian and U.S. auto sales for May.
Earnings include: Broadcom Inc.; BRP Inc.; C3 AI Inc.; Dollar General Corp.; Lululemon Athletica Inc.; VMware Inc.
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Friday June 2
(8:30 a.m. ET) U.S. nonfarm payrolls for May. The Street expects an increase of 195,000 from April with the unemployment rate rising 0.1 per cent to 3.5 per cent and average hourly earnings up 0.3 per cent.
Earnings include: E3 Lithium Ltd.; Skeena Resources Ltd.