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The week in the markets –
May 17, 2024
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Equities records continued to be broken
- U.S. inflation fell slightly, and while no one was overly surprised, markets loved it.
- Eurozone growth was higher than expected, but rate cuts still expected.
- Trump isn’t even in the White House and there were new U.S. tariffs on Chinese goods.
This week’s big news was the softer-than-expected U.S. consumer price index (CPI) report. This surprise led the market to fully price in two rate cuts for this year, with the first expected by September. Stocks and bonds rallied immediately and, despite some post-data fluctuations, both ended the day on a high note. The S&P 500 Index hit a new all-time high, driven primarily by the soft CPI data and supported by a weak retail sales report. The Dow Jones hit 40,000 for the first time ever.
Retail sales for the month came in flat, much lower than the expected 0.4% and the previous month’s 0.6%. The U.S. CPI rose 0.3% in April from March, slightly less than forecast, while core CPI, which excludes food and energy, met expectations at 0.3%. This marks the smallest monthly core CPI increase this year. The annual core CPI gain was 3.6%, the lowest in three years. Traders on Wall Street pushed stocks to all-time highs as bond yields dropped, reinforcing bets that the U.S. Federal Reserve (the Fed) will cut interest rates as early as September. The S&P 500 Index marked its 23rd record in 2024, as data showed that the CPI cooled for the first time in six months. Wall Street’s “fear gauge”, the VIX, sank to its lowest level since December. U.S. Treasuries gained value across all maturities.
Eurozone economy update
The eurozone economy started the year stronger than expected, growing 0.3% in the first quarter, after a shallow recession in late 2023. According to data released on Wednesday, inflation is likely to slow down faster than previously anticipated, with growth picking up next year. Unlike the Fed, the European Central Bank (ECB) is expected to start easing policy as early as its next meeting in June, as stated by Bank of France Governor, Francois Villeroy de Galhau.
U.S. tariffs on Chinese imports
The U.S. announced new tariffs on US$18 billion worth of Chinese imports, including steel, aluminum, semiconductors and electric vehicles (EVs). The tariff on EVs will jump from 25% to 100%. Some tariffs will take effect this year, while others will start in 2026. This move comes ahead of the presidential election in November, with both parties adopting a tougher stance on China. President Biden has kept most of Trump’s previous tariffs in place. Trump, speaking at a rally on Saturday, even suggested imposing a 200% tax on cars from Chinese plants. This shift indicated a move toward a more protectionist trade stance from both parties.
Listen to this week’s podcast for further insights.
This week's market closing value - week ending May 17, 2024
(As of 4:00 PM ET.*)
| EQUITY INDICES | Level | Change | WTD | YTD | 1-year | 5-year |
| CAD | CAD | CAD | CAD | |||
| S&P/TSX | 22,457.56 | 141.58 | 0.63% | 7.15% | 10.65% | 6.49% |
| S&P 500 | 5,300.23 | 78.66 | 1.05% | 14.04% | 28.91% | 13.39% |
| DJIA | 40,004.35 | 491.51 | 0.78% | 8.98% | 21.07% | 9.44% |
| FTSE 100 | 8,420.26 | -13.50 | 0.81% | 11.46% | 12.21% | 2.97% |
| CAC 40 | 8,167.50 | -51.64 | -0.16% | 9.50% | 11.98% | 8.16% |
| DAX | 18,704.42 | -68.43 | 0.10% | 12.92% | 18.96% | 8.53% |
| Nikkei | 38,787.38 | 558.27 | 1.06% | 7.83% | 15.31% | 5.46% |
| Hang Seng | 19,553.61 | 589.93 | 2.78% | 17.86% | 1.45% | -6.58% |
| CURRENCY RETURNS | CAD | Change | WTD | YTD | 1-year | 5-year |
| US$ | 1.3609 | -0.0062 | -0.45% | 2.68% | 1.14% | 0.22% |
| Euro | 1.4796 | 0.0069 | 0.47% | 1.13% | 1.45% | -0.29% |
| Yen | 0.0087 | 0.0000 | -0.39% | -6.97% | -10.54% | -6.50% |
| CANADIAN TREASURIES | Yield | Change | COMMODITIES | USD | Change |
|---|---|---|---|---|---|
| 3-month | 4.86 | -0.02 | Oil | $79.98 | $1.58 |
| 5-year | 3.70 | -0.07 | Gold | $2,415.92 | $51.76 |
| 10-year | 3.63 | -0.07 | Natural Gas | $2.64 | $0.38 |
| CANADIAN PRIME RATE |
|---|
| 7.20% |
*The data contained in the charts above is provided by Bloomberg as of 4:00 PM ET. Please note that the final closing market values may vary due to data delays and market settlement.
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