Markets look to U.S. for guidance this week, no Canadian figures set for release

TORONTO – A heavy slate of economic data in the U.S. will steer North American markets this week, as traders continue to digest the latest policy announcement from the U.S. Federal Reserve.

The markets will be looking to see if the latest figures on everything from home sales to consumer spending still point to a steady, yet marked recovery of the world’s biggest economy.

“Now that the (winter) weather is out of the way, is consumption picking up? These numbers will give us further clarity on that,” said Wes Mills, chief investment officer for Scotia Private Client Group.

What will be of particular interest will be data on the durable goods orders on Wednesday. Economists will be looking to see if business investments picked up in May following a long, harsh winter, with the core capital good orders, which excludes defence and transport categories. Traders will also look for the latest figures on existing and new home prices and sales on Monday and Tuesday as an indicator of how strong the U.S. economy is, and whether the data will support sending markets higher this summer.

There have been recent encouraging reports from the U.S., showing that it is on the right track to recovery after the winter made investors cautious about growth.

Recent good news on manufacturing and hiring has boosted confidence in the U.S. economy. Manufacturing is expanding at a healthy pace, and the service industry continues to grow, according to surveys released by the Institute for Supply Management earlier this month.

U.S. employers added 217,000 jobs to their payrolls in May, the fourth consecutive month of solid job gains. The number of Americans filing for unemployment benefits has also dropped close to the levels seen before the recession began in December 2007.

Last week, following a two-day policy meeting, U.S. Federal Reserve hinted that it wasn’t too worried about inflation, giving no signs when it might start raising interest rates again. As expected, the Fed also said it would continue to reduce its monthly bond buyback program by US$10 billion a month, to US$35 billion a month, starting in July.

Both the Dow Jones industrials and the S&P 500 finished last week at new all-time highs.

Meanwhile, the Toronto stock market ended the week just below of a new record high close of 15,112.22, which was set on Thursday, boosted by gains in energy, mining and financials. The Friday close was 3.25 points lower, at 15,108.97.

Andrew Pyle, senior wealth adviser at Scotia McLeod in Peterborough, Ont., said the TSX is building on momentum, which may not last into the summer if geopolitical risks like Iraq and Ukraine persist.

“Regardless of your call for stocks this summer, you’re going to find a pretty huge consensus that volatility will be higher,” he said. “Markets have been driven to levels not sustainable short term, hence we’re going to see volatility and that’s going to argue for places like gold.”

But don’t look for any Canadian data next week for guidance — there won’t be any.

“It’s going to be pretty quiet. Now we’re getting into the doldrums. We’re a couple of weeks away from earnings reports, so we have that lull. We’re a couple of weeks away from the employment numbers for June. Next week we’re not going to see a lot of trading on data… Canada is non-existent.”

The only major earnings report set for release next week will come from telecom company Shaw Communications (TSX:SJR.B).

In April, the Calgary-based company said it was laying off 400 employees so it could rearrange the structure of its cable, satellite, Internet and home phone services to make them more efficient. Shaw also said it will hire another 100 employees in areas where it is expanding. The telecom has about 14,500 employees across its operations and delivers services to about 3.2 million customers in Canada.

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