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As the U.S. first-quarter financial reporting season draws to a close, there are two interesting trends to note. First, investors are re-focusing their attention on macroeconomic data. Second, the upward momentum of stock prices has slowed.

The revival of interest in the big economic picture delivered a shock to the markets last week, as investors dumped stocks and commodities after seeing fresh data that indicated a slowing U.S. recovery and more aggressive monetary tightening in emerging markets. The S&P/TSX composite lost 2.7 per cent over the week, while the S&P 500 slipped 1.7 per cent.

Although corporate earnings have been reasonably strong so far this year, a lot of investors have opted to take profits on the good news, rather than assuming that prices can maintain their slow and steady ascent.

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"Weeks of up and up require an eventual correction. The longer you go without one, the worse it will eventually be," says Colin Cieszynski, market analyst with CMC Markets Canada Inc. in Toronto. "We probably saw the worst of it [last]Thursday, but we may see some stabilizing, and prices could dip lower, before it runs its course."

Mr. Cieszynski says that investors are also starting to realize that the period of low interest rates and easy money is drawing to a close. Central banks around the world have begun to bring interest rates back in line with inflation. And the U.S., clearly the laggard, will eventually have to do the same.

The Federal Reserve's $600-billion (U.S.) asset-buying program concludes at the end of June, and that will mark the end of increases in liquidity.

That liquidity has helped fuel stocks and commodity prices since last August, but the market's spasm last week could be an indicator of things to come as we enter the next phase, Mr. Cieszynski says.

As emerging-market countries begin to gently apply the brakes on their economies, further declines in the prices of commodities will likely occur. As investors were reminded last week, global demand for commodities drives the Canadian dollar far more than major domestic events such as a federal election.

A weaker Canadian dollar, in turn, would give the Bank of Canada more leeway for initiating its own rate hikes this summer, increasing the odds that the central bank begins tightening monetary policy by July, notes Avery Shenfeld, chief economist at CIBC World Markets.

This week, the macroeconomic data most likely to move the market include retail sales figures for April, which are to be released on Thursday. Economists expect to see clear evidence of growing consumer spending, which is forecast to rise 0.7 per cent after a 0.4-per-cent increase in March.

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On the same day, the U.S. Department of Labour is to publish the producer price index, which measures prices of goods before they are passed on to the consumer. Higher energy prices and a lower U.S. currency are expected to have boosted prices by 0.7 per cent in April to an annual rate of 6.5 per cent.

On Friday, the U.S. consumer price index for April is expected to hit 3 per cent, the highest mark in two-and-a-half years. Stripping out food and energy should leave core inflation rising slightly to 1.3 per cent, taking it closer to the Fed's target range of between 1.7 per cent and 2 per cent.

These data help influence how the Fed acts, and any surprise results would have a strong effect on the markets.

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