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[music] >>Hello, I'm Greg Bonnell. Welcome to MoneyTalk Live, brought to you by TD Direct Investing.
coming up on today show, MoneyTalk's Anthony Okolie is going to have a breakdown of the latest jobs reports on both sides of the border.
TD Asset Management's Ben Gossack will give us his view on which sectors are still benefiting from the China reopening trend.
And we're gonna hear from ARK Invest CEO Cathie Wood with her current view on the tech sector and the potential opportunity and AI. Plus, in today's WebBroker education segment, Nugwa Haruna will show us tools for managing market volatility on the platform.
Before we get to our content of the day, let's get you an update on the markets. We will start here at home with the TSX Composite Index. Pretty decent gain on this last trading day of the week of 258 points, about 1 1/4 of a percent to the upside. We are seeing a bounce back in the price of crude today but also seen quite a move and Air Canada. The airline is boosting its outlook citing stronger demand. Right now, you got Air Canada up to the tune of 12%, 20 bucks and $0.53 per share. Barrick Gold is seeing a bit of a pullback though in gold stocks today. You've got the price of gold itself pulling back by a rather substantial, about 35 bucks per ounce. It's been a volatile week across asset classes. At 2730, he brought Barry down, nothing too dramatic, a little more than 1%.
So of the border, we had a crush of earnings, we've had intrigue and continuing intrigue in the US regional banks, we had a Fed rate decision on Wednesday.
It's been a busy one. Overall, it looks like we might've been setting up for a losing week but were putting some point back on the screen today. At 4120, you got the S&P 500 up 59 points, about 1 1/2%. The tech heavy NASDAQ getting a bounce today as well. Let's check in on that one.
1.8% of the upside.
add 2763, you got Bank of America up at 2.4%.
That's a market update.
The latest jobs reports in both Canada and the United States easily topped analyst expectations.
Joining us that with more than MoneyTalk's Anthony Okolie. What's the readthrough on this one?
>> So as you mentioned, here in Canada, we saw the economy added about 41000 Jobs in April.
That's more than double the 20,000 that was expected.
The on appointment rate was steady again at 5% for the fifth consecutive month.
And this job gain in April, that extends the streak of job gains to eight months in a row.
And the Canadian job market is really showing no signs of slowing. When you look under the surface, part-time jobs really drove the headline figure. We saw nearly 48,000 part-time jobs. We lost over 6000 full-time jobs.
And Statistics Canada said that April was the first notable rise and part-time work since October 2022.
Now, when we look at breaking it down by industry is the next chart shows, job gains were primarily in the highly cyclical industries, and that includes things like wholesale and retail trade, transportation and warehousing and information, culture and recreation.
When we look at some of the losses, business building as well as other support services make up some of the drag on jobs. Finally, wages were up more than 5% year-over-year, down slightly from what we saw in March. Now, it's interesting because TD Economics talks about some interesting trends that they are seeing in the jobs numbers.
They said that the above trend pace of job growth over the past month was really driven by strong population growth in Canada. About 1 million people in the last year, that's really helped employers kind of plug the holes that we've seen, large number of job vacancies, it really help them make a dent in those job vacancies.
And because of strong immigration as well as a steady unemployment rate, which points to a new steady state, that means that some of these upside surprises that we are seeing in the job prints are less meaningful going for.
>> I thought was James Orlando's no, right? TD Economics. I found that interesting, that was very personable to thread and say, yeah, you will see robust drop growth and may become the new normal to a certain degree if you're going to have a million new people coming into the country, that's the Canadian story.
We're going to be dated and going forward. Now he got jobs out of the states, what are we seeing it there?
>> Stronger-than-expected job growth there. Data 250000 Jobs in April.Wall Street was expected about 180,000.
Again, another strong print. The employment rate was at 3.4% versus expectations of 2.6%. One of the saying is thatprobably will be concerning to the Fed, average hourly earnings, which is a key inflation barometer, it was a slightly versus forecast. And so I think the key implications for all of this is that the slowdown may be happening, but it's probably not having fast enough of the Fed. Now, the Fed did leave the door open for another potential rate hike in June.
They may need to follow through if they don't see a meaningful cooldown in the labour market soon.
>> I did see yields move a little bit higher off of that job's report, so definitely market keeping a careful eye. Thanks, Anthony.
>> My pleasure.
>> Montney Anthony Okolie. He will be back later in the show to look at the latest US auto sales data.
Now, let's stick with the economy. This week, we got that rate hike from the US Federal Reserve, putting benchmark rate at its highest level in 16 years.
Earlier, Anthony had the opportunity to speak with TD Asset Management Hafiz Noordin on his view about rates going for.
>> Is fairly in line, as indicated, and the statement leaned a little bit more dovish, even though we got the 25 basis point hi, there was an omissionaround the language about future rate hikes and the Fed moderated that language to essentially be a little bit more conditional on future data. But I would say the chair Powell and his press conference did lean a little bit more hawkish to balance that out, focusing on inflation being high and that need to keep getting inflation down was quite important to their mandate.
I think, overall, a fairly balanced statement and really indicates that independence quivered.
>> Okay, so given that balanced statement, what has been the market reaction? Specifically, what our US bond yields telling us about further interest-rate policy?
>> Well, bond yields were not too volatile today, I would say, which is kind of a good thing and that what the market was looking for was delivered.
Looking ahead beyond this hike, there's a lot that the market is expecting to happen in June and July, beginning toward September is when the market is still expectingthe first rate cut. And then beyond that, another two rate cuts by the end of the year.
And so that's still in line with where we were before the meeting. The market is still expecting inflation to moderate and growth to come down and that would cause the Fed to have to start cutting in September.
>> And in terms of those fed cuts, is not too optimistic in your view, given this balanced statement?
>> Well, there's definitely a two-sided risk to it.
There isn't just one sort of base case where we are going towards that fed passive lower inflation and lower growth. There is definitely risk to that.
Liquidity is also being very poor and the treasurer you market, so it's hard to clean the right signals right now. I definitely say there is still that scenario that is data comes in, if inflation wages are still firmer than what is expected by the market, we could see no cuts for the rest of the year.
I think if we do continue to see inflation coming down and we do see core inflation coming down and particularly we see the labour marketstarting to get a little bit weaker, I think that would indicate the markets view of rate cuts coming to the extent that we are still in a restrictive territory for the Fed policy rate, we are going from very restrictive to still somewhat restrictive.
>> And you mention inflation. The Fed has said that inflation is still a primary focus but they've also acknowledged the headwinds, the banking crisis for one, the weakening economic growth. But the job market, as you mentioned, remains resilient. How does the Fed navigate all of these crosscurrents?
>> They have to look at the data, showing rid of a rearview mirror, with been happening recently and economic data around labour, consumption and business sentiment.
but they also have to look at forward-looking indicators around all parts of the economy really to assess what they said in the statement, which is what is the cumulative lag of monetary tightening policy doing to the economy going forward? They also have to monitor how banks have been tightening credit conditions and to what extent is that reducing economic growth? They need to look at those forward-looking indicators because they know that even if they start cutting now,it takes many quarters for that to feed into the market.
So they do need to be proactive, not stay too hawkish for too long with the risk being that they would lead the economy to a deeper recession than what they are expecting.
>> When we talk about this forward leading indicators, what you see is some of the key risks to the feds outlook going forward?
>> One of the key risks for sure is around inflation.
They have been expecting this does inflationary process to continue prayer the market itself is price for inflation to moderate to the 3 to 4% range by the end of the year and getting more towards 2% over the next couple of years.
That's definitely the key risk. On the hawkish side, that would keep the Fedwading or hiking.
We can count better.
I think another scenario is that there is definitely the policy mistake on the other side where they stay on hold for too long and cause more of a crash in the economy because borrowing rates are very high. And if they are too focused on backward -looking data for inflation that looks high, they may miss the fact that all of the training that has been done is already doing the job, and so they have to be careful not to over tighten in that sense.
>> I want to talk about the US dollar because it has been on a bit of a downtrend leading up to this the decision.
Where do you see the US dollar going in the future, especially with them signalling a potential pause and future rate hikes?
> All is equal, it does indicate that the US dollar should stayflat two weaker from here because you do have the Fed pausing but on other parts of the global economy, you have the European Central Bank still hiking.
They are still in this 25 versus 50 basis point debate.
They are still at that stage the hiking cycle.
Then you have the Bank of Japan, for instance, still in the very early stages of monetary policies hiking. So what that could mean is that you see other currencies appreciate more versus the US dollar and even from a growth perspective, if we start to see all of the tightening hit earlier in the US or other parts of the world, credit conditions are not as tight, that would mean that US growth should underperform versus global X US growth.
So all that does lead to the US dollar likely being a little bit weaker from here, but we should remember that the US dollar is down from about 10% from its peak in Q3, Q4 of last year and that means that from here, a lot of the easy money has been made in terms of the short US dollar and I think right now there is still a little bit more resilience in the near term, but the broader theme is still that the US dollar should likely weekend.
>> That was Hafiz Noordin, portfolio manager with TD Asset Management in conversation with our Anthony Okolie.
Right now, let's get you updated on the top stories in the world of business and take a look at how the markets are trading.
Apple says it's seeing opportunity to boost iPhone sales in the emerging markets.
CEO Tim Cook says the company set sales records and several overseas countries in its latest quarter, adding there's still market share to capture across South Asia, Latin America and the Middle East. Cook pointed to India's emerging middle class, saying the country could be a tipping point for Apple. God Enbridge postings longer than those affected earnings for its most recent quarter. The pipeline giant US gas transmission business and the Gulf Coast operations led the way, and favourable foreign exchange effects also contributed.
No apart from the earnings, Enbridge also reached a negotiated settlement this week with shippers on its main line. Stock up a little bit more than 1%.
You got shares of Lyft in the spotlight today, that is the market reacts to a week with an inspected sales forecast for the current quarter.
The disappointing guidance comes on the heels of 14% rise in revenue for the ride hailing company in its most recently reported quarter, but clearly the market is like that guidance.
At 844, he got Lyft down and 21%. A quick check in on the market, we will look at the TSX here at home on Bay Street.
246 points on the board today, sort of a nice bounce back from a bit of a choppy week, we are up 1.2% in Toronto. Let's check out Wall Street with the S&P 500.
Indeed, it's been a choppy week down there as well.
With 57 points in the green today, we are up 1.4%.
One of the big themes for investors to start 2023 was the surprise reopening of China after years of COVID restrictions, but as we had deeper into the year, which sectors of the market are still benefiting from the trend and which have begun to lose some steam?
Ben Gossack, portly manager with TD Asset Management joined us earlier to discuss.
>> I mean, at the start of every year, we always look into our crystal balls about what's going to happen.
Definitely China was a big catalyst.
my bingo scorecard didn't have deposit crisis issues for US regional banks, so can't win them all.
What was really interesting about the China reopening, when he spoke to management teams in November that really depend on China, we had no visibility and when China was reopening.
So when we got that surprise reopening in December, the game was on.
And so what you saw was that everyone got the benefit that China was reopening, and it didn't matter if you were a material stock, tight to travel or consumer consumption, industrial activity, it was just everything was China and there was almost a FOMO, a fear of missing out because stock prices went up. One of the first sectors that really caught our eye was the casino stocks in Macau.
So again, no activity.
there stocks had been cratered and right away they were up 100%.
And so we have seen now, and we are about five, six months into reopening, they now have to go into those price movements.
So we've had this these hundred percent move south bottom, some have retraced by 20% but they are going sideways.
The enduringsectors, the one that has continued to work has been luxury.
This is a theme that we have been talking about for quite some time. China reopening has helped fuel the luxury companies. We have seen companies like Hermus, LVMH report and their stocks are pushing two brand-new highs. The part that's quite interesting, I think we have some charts to show, the choppiness of the market and the uncertainty of the marketand where to put their allocation and we've seen people move into cash or GICs. And when you look at a chart like an LVMH or Hermes or other luxury stocks, you wouldn't even know that there are any issues going on. It's quite amazing.
there are so that you a specific list of companies that would get the benefit of China opening, Nike, Starbucks or Estée Lauder, we are seeing mixed results.
>> Starbucks is supposed to be counting on China fora big growth engine for it.
>> In fact, great, they reported yesterday, there Marchstores, so comparables stores sales were up 30%.
So the activity is there.
What was disappointing for investors and why the stock took back 9% of its market Is that the expectations weren't carried forward for the rest of the year.
So there's this question now. We see in this big move inactivity. Does that continue? Is management telling us that that's not sustainable?
Or is management being very conservative, wanting to lower our expectations to something they can grow into?
So I'd be more on the conservative part. But definitely the activity showed up.
>> Estée Lauder, this is make up, right?
>> Yeah. Does she get to go to the house, you to do things, you want to look good.
I think you have it is one of those companies that's losing steam. Why is that?
>> Not just any makeup, we are talking about prestige makeup.
It's one of those companies we look at the financial… > The kind of stuff that we use and for the camera, proceed.
[laughing] >> Of course. And the margins look… It's really profitable business. If you look at the stock chart for Estée Lauder, Greg, just prior to COVID, around October, it gets the benefit of the reopening and for Estée Lauder, a lot of their sales are tied to travel.
So people are going to go somewhere, they're going to go to duty-free.
They will buy makeup and all of those stores that they see in the airport. They depend on that and so they got the benefit of the doubt.
And much like investors, we had to make assumptions on which companies would benefit from reopening. The management teams have to make assumptions of how much do I order?
How much do I try to sell to the channel, the retail, the end, let's say, merchant that's going to sell to you and me so that we can look good?
And so they made a lot of big assumptions. There is activity, just like we said was Starbucks. There is activity, but they are not converting the customer into those sales, so right now they have a very bloated inventory and bloated channel.
So they make revenue recognition when they sell to the merchant and right now the merchant is just sitting on too much stock. So even provinces like Hynan, which is very popular for a resort area, there is tremendous volume activity but the customer is just not buying the beauty products.
we saw consumer confidence get really impacted with COVID in China. People are coming out, they want to travel, they want to feel good, but they are being a very selective of what they've been their money on.
>>let's talk about travelling, right? Once you start to reopen an economy, people go on vacation, they go about. There's obviously some names that are tied to that.
This one, trip.
com, Ctrip. From the name alone, I'm assuming it has something to do with travel. Am I making a big leap there?
>> So this is they are online each travel company, similar to what people would think of as booking.
com, or TripAdvisor. So yes, it got the benefit of the doubt.
the activity is not as much as our expectations going into it.
I will say for travel and what I've learned just speaking to people on the ground is that a lot of Chinese citizens, their passports expired over COVID.
In many countries, they need to apply for visas. So yes, you're thinking, they're going to go in trouble.
We have seen domestic airline activity exceed pre-COVID levels. International activities still very subdued.
And so when I look at opportunity, there is still a tremendous opportunity probably in the late spring into summer where travellers can get their visas updated, can get their visas, will go to Europe and other countries and start sending money.
>> What are the risks for a name like that?
With the travel rebound, assuming people don't want to go abroad?
>> Yeah, they definitely do want to go abroad.
I think the issue is really getting into the mind of the consumer is that, okay, they might buy A but they might not buy B. I think that has been challenging for investors and it's been just as frustrating for the management teams and sort of if you are selling something that you put on a shelf,you never want to have an empty shelf, but the risk in terms of supplying this product is the oversupply and then you have to work to the inventory.
No different than during the pandemic. We bought too much goods, then the supply chain got tired and it got over delivered and we saw companies have to discount.
So this is the part where the euphoria is over. We are starting to see the dust settle and we are starting to see some companies have been working in we've seen companies like an estay or Starbucks that have taken a step back. But even, talking industrials and materials, we thought that COVID coming away, we thought there would be stimulus. We've seen manufacturing activity kind of be lacklustre versus expectations and we've seen materials like iron ore kind of get a lift up and then have completely retraced or rebounded. So goes across all sectors. So I'd say that initial way of of euphoria has come down.
The enduring sectors, I'd say, have been aerospace and luxury.
>> That was Ben Gossack, four folio manager with TD Asset Management.
Now, let's get to our educational segment of the day.
In choppy markets, you may be concerned about potentially overpaying for a stock or having to sell at a very reduced price.
Well, amid all this heightened volatility, WebBroker has tools to help you potentially manage that risk.
Joining us now with more is Nugwa Haruna. Always a pleasure to see you. Let's talk about was available here on the platform when you're talking about these issues.
>> Right. So it's always a pleasure being here, Greg.
And yes, we now are in, right in the middle of a volatile market. We've been talking about this for over a year now and one of the features of a volatile market is those choppy prices that we mention.
So you might see huge swings and prices that could be downward or upwards and so some investors may decide to sit out trading during this timeframe, but some other investors may look to take advantage of this. So for instance, a decline in prices could be an opportunity to buy into a specific position that some investors may have wanted and the opposite where the prices actually increased could be an opportunity for investors to exit a position. So how can investors take advantage of that? Well, they are able to use certain order types to be able to do that.
So we will touch today on the limit order. Let's go into WebBroker and I will show how you can place a limit order.
In WebBroker, I will click on the buy sell ticket on the top right hand corner of the screen here. That will pull up my trade ticket.
I'm going to use a stock you mentioned today, we will just go with Apple. And I will go with the US listed stock here.
Once I do this, have an opportunity, let's say I own the stock and I'm looking to sell it. Typically, if you're looking to sell something, you're actually looking to make a profit,let's say I own 100 Apple shares and I want to tell it to make a profit. Well, I could potentially use a market order which essentially gives me whatever the market price is, which could end up being slightly more or less than the last price. But if I want to have some control and I'm expecting that prices will stay volatile, there may be a huge spike, I can take advantage of that by using something called a limit order.
I'm going to click on the drop down here, click on limit and here I can place my limit price. So I could say I'm only willing to sell my stocks if the price of the stock goes up $285. Now, this way gives me some control. That is the floor I'm willing to accept.
Anything more than 185 is even better because I make even more of a prophet.
And then, though, I do want to keep in mind that if my limit price is much higher than the current market price, I might be waiting a while for this order to go through. So right under here, using the good detail, I will place a determination on how long I want to wait.
So we know it sometime after noon right now so if I want to wait for the rest of the day until 4 PM because that's when the markets are open until, I can leave it as a day order which means that at 4 PM, if Apple stock does not go up to hundred and 85, my order will cancel.
Or I can click on this drop down and take a look at some of the other options.
I could use a good till specified that lets me choose a specific date or I could use the good till cancelled, and this will let my order stay in the system until it expires. For US listed stocks, that the hundred and 80 calendar days and for Canadian listed stocks, that's 90 calendar days.
>> Okay, so now we have some information here about different kinds of orders that you place to try to manage volatility. Of course, volatility is just not between 9:30 AM Eastern and 4 PM when the market is open.
How can investors trade outside of the standard market hours?
>> And you are correct, Greg.
We just came off earnings season and you will find that when companies make their earnings announcements, either before the markets open or after the markets open, they do this so that it doesn't impact the valuation of their security if they do it during market hours.
But investors can still trade during these time frames.
So within WebBroker, investors can actually place orders between 8 AM and 9:20 AM Eastern standard Time or between 4 and 7 PM Eastern standard Time. See you still have an opportunity to participate in the markets and maybe once again enter or exit a position.
So it's going to WebBroker and I'll show you how you can take advantage of those extended market features that we have.
So still using our example on screen, let's say I do want to so my Apple stock at $185, using this drop down, you will notice that there is an additional option, and that would be the day plus extended markets.
So what this means is if I place this order right now or sometime after 12 PM Eastern standard Time, this order will stay good until 4 PM. And then it will rule into the extended markets, which is for 7 PM. Now, when 7 PM comes around, if I'm unable to sell my stock that hundred and $85, this order will be cancelled which means that tomorrow, I will need to go back in early tomorrow and put this in again. So essentially how the date was extended is a gives you the advantage of utilizing those premarket hours, a 920 or aftermarket hours, 40 7 PM, but it only lasts for that day. Now there are a few things you want to be aware of. Because not a lot of people are trading during this time, there is not that much liquidity and investors might find a lot of volatility during that timeframe as well because that's when some of these announcements are made by companies.
And one more thing investors want to be aware of is that if you are utilizing the extended market option, this is only available with US traded stocks and ETFs, it's not available with Canadian stocks or penny stocks, so just a few things to be aware of if you decide you want to use this.
>> Great stuff as always, Nugwa, thinks that.
>> Thank for having me.
> Nugwa Haruna, senior client education instructor at TD Direct Investing.
And make sure to check out the learning centre in WebBroker for more educational videos, live, interactive master classes and upcoming webinars.
Stock technology stocks had a strong start to the year after pretty challenging 2022, but could that run continue amid some signs of slowing growth?
Cathie Wood, CEO and chief investment officer at ARK Invest joined us earlier to discuss that in her view on the potential for artificial intelligence.
>> ARK's investment time horizon is five years. So yes, long-term, and that's somewhat contrarian in this market but we think it's very important to keep our eyes on the prize and do deep research on how technology is going to evolve.
Now, we think it's going to evolve very quickly during the next few years.
>> Alright, as we talk about this quick evolution, I want to talk about some of these things perhaps you have your eye on. Everyone has been talking for several months now about ChatGPT. Really, the court that, we are talking about artificial intelligence. People are saying the changes there could be swift.
What are you anticipating in the space?
>> We have been doing research on this space ever since ARK was founded in 2014 and we think it's terrific that finally something in the innovation space like ChatGPT has captured both the consumer and the business imagination and is really at helping people understand that the world of innovation is changing very quickly and the changes are pretty profound. I'm not sure if you've experimented with it, but from an educational point of view, it's going to change education, is going to change work completely, even in areas like developers, engineering.
We are seeing coaling productivity go up to fold within less than a year and we actually think that could go up tenfold, but of course it has been an area of great labour shortages. So I know there was also an announcement today, IBM said it was going to hire no more people in the back office. And so for back office worker, ChatGPT and AI generallyis probably going to take the place of human beings.
But in that regard, it's going to take people out of some areas that are tedious, shall we say, and create other opportunities that we think are going to be pretty exciting.
>> Yeah, because that conversation around artificial intelligence, obviously there is excitement about what it can deliver and I have experiments and with some of these apps that you're talking about, but there is also a bit of fear and trepidation among people about change of this scale or a wholesale change, almost, could be pretty disruptive of society.
>> I think you are right, and I think that we are going to need retraining and reeducation, but these technologies are very exciting and also hold great promise for those they get on the right side of change.
So I think just experimenting with ChatGPT, you see the power behind AI and you can also see how you can learn a lot of these new technologies by yourself. For example, with natural language processing, we are all going to become programmers, effectively.
And now, a year ago, most people would think, I could never be a programmer. But now, some of our analysts have used ChatGPT to design their own website, copying another website. And that's in less than a day.
So it's pretty provocative. I think you have to really want to engage with it and experiment and those with initiative and creativity, thing, or when you have a lot of fun and very enjoyable careers.
>> That's one of the big themes right now and AI but that's another thing I noticed saying in the thick of earnings season, we've had some heavyweight tech names reporting. AI is creeping as everyone statements and what they have to say about the future of the business going forward. What are you taking away so far from some the big tech names we've seen this earnings season?
>>well, I think that the larger platforms, the larger social platforms, are taking advertising share from the smaller ones. That's clear and it's been a pretty quick shift, I would say. I think all of them are suffering last year and the larger ones are now grabbing share.
Yes, AI is discussed quite a bit in most of these calls but we think that it's a real risk to a company like Alphabet.
I have never really enjoyed Google searchmyself. I wish it could be smarter. I'm sure we've all had that experience. Well, guess what?
ChatGPT, once they start putting it through and including recent times as well, I think is going to usurp search.
Now, Google or Alphabet says that it's on it, it's on the case and it should be because it has some of the best AI experts in the world. Bought a company called deep mind, but somehow they have been risk-averse and open AI has stolen the merchant with the ChatGPT. The other thingwe are trying to understand is what will be the impact on Apple? It could be that ChatGPT will diss intermediate apps with so-called plug-ins and really just take us directly to wherever we want to go, whatever our website we want to go, it'll anticipated.
So I think while many cap tech has recently come on strong, we are looking at the destruction and disintermediation risks that they are facing as well.
>> These are disruptions that will obviously have a longer term effects on the tech sector and shape going forward. Right now, it's hard to ignore the fact that investors are concerned about slowing growth. We have heard that from some the companies to you in terms of their clients getting a little bit more cautious on spending on the cloud and some other areas, as the Federal Reserve might deliver what the interest rate path is going forward.
What should we be thinking about the rest of this year in terms of some of the volatility going forward?
>> Well, I think thatI think it's accelerating contrary to what Jamie Dimon said after buying First Republic orparts of it. We are seeing, we believe that the Fed, because of the Fed interest rate hikes, a 20 fold increase in one year that deposits are leaving the system and moving into treasury funds. And treasury funds do nothing but sit there. They can't be loaned out. They can't encourage business activity, whereas deposits and banking systems, the other side of those can be loans, and so we have a file that we have started were in the early stages of a credit crunch that is going to be much more serious than I think most are expecting.
I think the regional bank index is beginning to telegraph that. It has broken down, which tells us that deposits will continue to outflow until the Fed reverses its position, until the Fed pivots. And we do see, you mentioned the oil price, I think has defied most people's expectations this year, especially everyone expecting China to come back once it dropped to a zero COVID policy, and that has not happened. So something's going on out there that is broader than even the US. We do believe that there is much more weakness in the global economy that most appreciated and I would say that it's interesting because China was shut down for so long, I think we all expected a little bit more than we've seen.
Some consumers companies have seen some activity but the has not. One of the things going on, it doesn't seem that Russia has been forced to cut production and it seems like it's still selling its production at a discount and that is beginning to affect the rest of the market.
>> That was Cathie Wood, CEO of ARK Invest.
Let's check in on the markets right now.
We got a bit of a bounce back on this Friday, the last trading day of the week, right now the TSX Composite Index is up 1.3%, 255 points to the upside.
We saw some studying at least in the price of American benchmark crude yesterday from the dramatic drops of earlier in the week,and today we are gaining some of that back. He got American benchmark crude up about two bucks and $0.60 per barrel, back above 70. It's benefiting some energy names including Cenovus. I 2127, it's up we will call at 3% to the upside.
Gold is pulling back of it today as investors calmed down a little bit after a pretty choppy ride this week.
You got the price of gold down about 34 bucks, and you've got some of the gold-mining names down as well.
Can't Kinross at 715 per share is down 1/4%. So the border it's beena big week, a slew of earnings, murmured turmoil in the regional banks in the United States, but today some green on the screen.
57 points the upside, up 1.4% for the broader read of the market.
check out the tech heavy NASDAQ and see how it's fearing right now against the broader market. A little bit better. 1 3/4 of a percent to the upside.
And Carvana, the stock making fairly big moves today.
It's a used car retailer. It says it's going to become profitable on an adjusted basis sooner than expected, talking about the second quarter. At nine bucks and $0.30 per share, it's up 29%.
We talked about cars, let's talk about the US auto sector.
Shifting into a higher gear in April as inventories begin to recover. Our Anthony Okolie has been digging into these latest sales figures and has some commentary from TD Economics.
>>It's a very strong start for US auto sales for the second quarter. April saw sales up more than 7% month over month, that equates to over 16 million units annualized.
On an adjusted sales volume spaces, sales were up pretty strong, 9% year-over-year. Now again, we are seeing his dealership inventories continue to bounce back from last summer's lows and so there is an improvement in the average daily selling rate as well.
It rose to about 51,000 cars sold over the past 26 Days in April, that's up versus about 46000 Daily Rate in April of last year.
Breaking it down by vehicle type, passenger vehicles actually shot up 11% year-over-year, edging out light trucks which were only up about 8% year-over-year.
Again, light trucks accounted for the bulk of April sales, around 79%, so that's equal to the share that it had back in April 2022.
Now, TD Economics says that light vehicle sales in April, the gains mark to the eighth consecutive gains indicating that it's a pretty strong start to the spring buying season for US vehicles.
Now, what's driving it?
Pent-up demand is really boosting those sales.
Sales are actually just 2.6% the April 2019 levels. So quite strong. Despite the pickup that we saw in passenger vehicles, and many automakers continue to focus on the larger vehicles like compact SUVs, full-sized pickup trucks, midsize SUVs, which are also likely the most expensive products as well. Companies like Ford, Hyundai and Chevrolet, we've seen it that they discontinued smaller vehicles and are focusing again on producing SUVs and trucks.
Overall, it was a strong start to the second quarter.
While inventories did fall modestly in April, TD Economics says that it will be short-lived and, as auto production increases over the coming months, likely because of improved supply chain pressure.
Greg?
> Okay, so that's what's behind this. What does TD Economics think about the months and the rest of the year and maybe even some risks to all this?
>> I think they are looking for sales to rise 12% year-over-year to just over 15 million units.
production is expected to increase this year to just about 5% year-over-year. Full normalization to pre-pandemic levels won't happen until 2024.
Some of the risks, it's inflation remains higher for longer, could prompt the Fed to continue to raise rates and that's going to put pressure on borrowers. Of course, it will increase the borrowing rate.
Then, we could see higher level of demand instruction as well.
>> Fascinating stuff. Thanks, Anthony.
>> My pleasure.
>> MoneyTalk's Anthony Okolie.
You want to stay tuned for Monday show. James Dixon, Dir.
of family office solution that TD Securities will be our guest, take your questions about market trends. A reminder, course, you can get a head start on those questions.
Just email moneytalklive@td.com. On behalf of Anthony and me here on the desk and everyone behind the scenes producing the show every day, thanks for watching all week and will see you next week.
[music]
coming up on today show, MoneyTalk's Anthony Okolie is going to have a breakdown of the latest jobs reports on both sides of the border.
TD Asset Management's Ben Gossack will give us his view on which sectors are still benefiting from the China reopening trend.
And we're gonna hear from ARK Invest CEO Cathie Wood with her current view on the tech sector and the potential opportunity and AI. Plus, in today's WebBroker education segment, Nugwa Haruna will show us tools for managing market volatility on the platform.
Before we get to our content of the day, let's get you an update on the markets. We will start here at home with the TSX Composite Index. Pretty decent gain on this last trading day of the week of 258 points, about 1 1/4 of a percent to the upside. We are seeing a bounce back in the price of crude today but also seen quite a move and Air Canada. The airline is boosting its outlook citing stronger demand. Right now, you got Air Canada up to the tune of 12%, 20 bucks and $0.53 per share. Barrick Gold is seeing a bit of a pullback though in gold stocks today. You've got the price of gold itself pulling back by a rather substantial, about 35 bucks per ounce. It's been a volatile week across asset classes. At 2730, he brought Barry down, nothing too dramatic, a little more than 1%.
So of the border, we had a crush of earnings, we've had intrigue and continuing intrigue in the US regional banks, we had a Fed rate decision on Wednesday.
It's been a busy one. Overall, it looks like we might've been setting up for a losing week but were putting some point back on the screen today. At 4120, you got the S&P 500 up 59 points, about 1 1/2%. The tech heavy NASDAQ getting a bounce today as well. Let's check in on that one.
1.8% of the upside.
add 2763, you got Bank of America up at 2.4%.
That's a market update.
The latest jobs reports in both Canada and the United States easily topped analyst expectations.
Joining us that with more than MoneyTalk's Anthony Okolie. What's the readthrough on this one?
>> So as you mentioned, here in Canada, we saw the economy added about 41000 Jobs in April.
That's more than double the 20,000 that was expected.
The on appointment rate was steady again at 5% for the fifth consecutive month.
And this job gain in April, that extends the streak of job gains to eight months in a row.
And the Canadian job market is really showing no signs of slowing. When you look under the surface, part-time jobs really drove the headline figure. We saw nearly 48,000 part-time jobs. We lost over 6000 full-time jobs.
And Statistics Canada said that April was the first notable rise and part-time work since October 2022.
Now, when we look at breaking it down by industry is the next chart shows, job gains were primarily in the highly cyclical industries, and that includes things like wholesale and retail trade, transportation and warehousing and information, culture and recreation.
When we look at some of the losses, business building as well as other support services make up some of the drag on jobs. Finally, wages were up more than 5% year-over-year, down slightly from what we saw in March. Now, it's interesting because TD Economics talks about some interesting trends that they are seeing in the jobs numbers.
They said that the above trend pace of job growth over the past month was really driven by strong population growth in Canada. About 1 million people in the last year, that's really helped employers kind of plug the holes that we've seen, large number of job vacancies, it really help them make a dent in those job vacancies.
And because of strong immigration as well as a steady unemployment rate, which points to a new steady state, that means that some of these upside surprises that we are seeing in the job prints are less meaningful going for.
>> I thought was James Orlando's no, right? TD Economics. I found that interesting, that was very personable to thread and say, yeah, you will see robust drop growth and may become the new normal to a certain degree if you're going to have a million new people coming into the country, that's the Canadian story.
We're going to be dated and going forward. Now he got jobs out of the states, what are we seeing it there?
>> Stronger-than-expected job growth there. Data 250000 Jobs in April.Wall Street was expected about 180,000.
Again, another strong print. The employment rate was at 3.4% versus expectations of 2.6%. One of the saying is thatprobably will be concerning to the Fed, average hourly earnings, which is a key inflation barometer, it was a slightly versus forecast. And so I think the key implications for all of this is that the slowdown may be happening, but it's probably not having fast enough of the Fed. Now, the Fed did leave the door open for another potential rate hike in June.
They may need to follow through if they don't see a meaningful cooldown in the labour market soon.
>> I did see yields move a little bit higher off of that job's report, so definitely market keeping a careful eye. Thanks, Anthony.
>> My pleasure.
>> Montney Anthony Okolie. He will be back later in the show to look at the latest US auto sales data.
Now, let's stick with the economy. This week, we got that rate hike from the US Federal Reserve, putting benchmark rate at its highest level in 16 years.
Earlier, Anthony had the opportunity to speak with TD Asset Management Hafiz Noordin on his view about rates going for.
>> Is fairly in line, as indicated, and the statement leaned a little bit more dovish, even though we got the 25 basis point hi, there was an omissionaround the language about future rate hikes and the Fed moderated that language to essentially be a little bit more conditional on future data. But I would say the chair Powell and his press conference did lean a little bit more hawkish to balance that out, focusing on inflation being high and that need to keep getting inflation down was quite important to their mandate.
I think, overall, a fairly balanced statement and really indicates that independence quivered.
>> Okay, so given that balanced statement, what has been the market reaction? Specifically, what our US bond yields telling us about further interest-rate policy?
>> Well, bond yields were not too volatile today, I would say, which is kind of a good thing and that what the market was looking for was delivered.
Looking ahead beyond this hike, there's a lot that the market is expecting to happen in June and July, beginning toward September is when the market is still expectingthe first rate cut. And then beyond that, another two rate cuts by the end of the year.
And so that's still in line with where we were before the meeting. The market is still expecting inflation to moderate and growth to come down and that would cause the Fed to have to start cutting in September.
>> And in terms of those fed cuts, is not too optimistic in your view, given this balanced statement?
>> Well, there's definitely a two-sided risk to it.
There isn't just one sort of base case where we are going towards that fed passive lower inflation and lower growth. There is definitely risk to that.
Liquidity is also being very poor and the treasurer you market, so it's hard to clean the right signals right now. I definitely say there is still that scenario that is data comes in, if inflation wages are still firmer than what is expected by the market, we could see no cuts for the rest of the year.
I think if we do continue to see inflation coming down and we do see core inflation coming down and particularly we see the labour marketstarting to get a little bit weaker, I think that would indicate the markets view of rate cuts coming to the extent that we are still in a restrictive territory for the Fed policy rate, we are going from very restrictive to still somewhat restrictive.
>> And you mention inflation. The Fed has said that inflation is still a primary focus but they've also acknowledged the headwinds, the banking crisis for one, the weakening economic growth. But the job market, as you mentioned, remains resilient. How does the Fed navigate all of these crosscurrents?
>> They have to look at the data, showing rid of a rearview mirror, with been happening recently and economic data around labour, consumption and business sentiment.
but they also have to look at forward-looking indicators around all parts of the economy really to assess what they said in the statement, which is what is the cumulative lag of monetary tightening policy doing to the economy going forward? They also have to monitor how banks have been tightening credit conditions and to what extent is that reducing economic growth? They need to look at those forward-looking indicators because they know that even if they start cutting now,it takes many quarters for that to feed into the market.
So they do need to be proactive, not stay too hawkish for too long with the risk being that they would lead the economy to a deeper recession than what they are expecting.
>> When we talk about this forward leading indicators, what you see is some of the key risks to the feds outlook going forward?
>> One of the key risks for sure is around inflation.
They have been expecting this does inflationary process to continue prayer the market itself is price for inflation to moderate to the 3 to 4% range by the end of the year and getting more towards 2% over the next couple of years.
That's definitely the key risk. On the hawkish side, that would keep the Fedwading or hiking.
We can count better.
I think another scenario is that there is definitely the policy mistake on the other side where they stay on hold for too long and cause more of a crash in the economy because borrowing rates are very high. And if they are too focused on backward -looking data for inflation that looks high, they may miss the fact that all of the training that has been done is already doing the job, and so they have to be careful not to over tighten in that sense.
>> I want to talk about the US dollar because it has been on a bit of a downtrend leading up to this the decision.
Where do you see the US dollar going in the future, especially with them signalling a potential pause and future rate hikes?
> All is equal, it does indicate that the US dollar should stayflat two weaker from here because you do have the Fed pausing but on other parts of the global economy, you have the European Central Bank still hiking.
They are still in this 25 versus 50 basis point debate.
They are still at that stage the hiking cycle.
Then you have the Bank of Japan, for instance, still in the very early stages of monetary policies hiking. So what that could mean is that you see other currencies appreciate more versus the US dollar and even from a growth perspective, if we start to see all of the tightening hit earlier in the US or other parts of the world, credit conditions are not as tight, that would mean that US growth should underperform versus global X US growth.
So all that does lead to the US dollar likely being a little bit weaker from here, but we should remember that the US dollar is down from about 10% from its peak in Q3, Q4 of last year and that means that from here, a lot of the easy money has been made in terms of the short US dollar and I think right now there is still a little bit more resilience in the near term, but the broader theme is still that the US dollar should likely weekend.
>> That was Hafiz Noordin, portfolio manager with TD Asset Management in conversation with our Anthony Okolie.
Right now, let's get you updated on the top stories in the world of business and take a look at how the markets are trading.
Apple says it's seeing opportunity to boost iPhone sales in the emerging markets.
CEO Tim Cook says the company set sales records and several overseas countries in its latest quarter, adding there's still market share to capture across South Asia, Latin America and the Middle East. Cook pointed to India's emerging middle class, saying the country could be a tipping point for Apple. God Enbridge postings longer than those affected earnings for its most recent quarter. The pipeline giant US gas transmission business and the Gulf Coast operations led the way, and favourable foreign exchange effects also contributed.
No apart from the earnings, Enbridge also reached a negotiated settlement this week with shippers on its main line. Stock up a little bit more than 1%.
You got shares of Lyft in the spotlight today, that is the market reacts to a week with an inspected sales forecast for the current quarter.
The disappointing guidance comes on the heels of 14% rise in revenue for the ride hailing company in its most recently reported quarter, but clearly the market is like that guidance.
At 844, he got Lyft down and 21%. A quick check in on the market, we will look at the TSX here at home on Bay Street.
246 points on the board today, sort of a nice bounce back from a bit of a choppy week, we are up 1.2% in Toronto. Let's check out Wall Street with the S&P 500.
Indeed, it's been a choppy week down there as well.
With 57 points in the green today, we are up 1.4%.
One of the big themes for investors to start 2023 was the surprise reopening of China after years of COVID restrictions, but as we had deeper into the year, which sectors of the market are still benefiting from the trend and which have begun to lose some steam?
Ben Gossack, portly manager with TD Asset Management joined us earlier to discuss.
>> I mean, at the start of every year, we always look into our crystal balls about what's going to happen.
Definitely China was a big catalyst.
my bingo scorecard didn't have deposit crisis issues for US regional banks, so can't win them all.
What was really interesting about the China reopening, when he spoke to management teams in November that really depend on China, we had no visibility and when China was reopening.
So when we got that surprise reopening in December, the game was on.
And so what you saw was that everyone got the benefit that China was reopening, and it didn't matter if you were a material stock, tight to travel or consumer consumption, industrial activity, it was just everything was China and there was almost a FOMO, a fear of missing out because stock prices went up. One of the first sectors that really caught our eye was the casino stocks in Macau.
So again, no activity.
there stocks had been cratered and right away they were up 100%.
And so we have seen now, and we are about five, six months into reopening, they now have to go into those price movements.
So we've had this these hundred percent move south bottom, some have retraced by 20% but they are going sideways.
The enduringsectors, the one that has continued to work has been luxury.
This is a theme that we have been talking about for quite some time. China reopening has helped fuel the luxury companies. We have seen companies like Hermus, LVMH report and their stocks are pushing two brand-new highs. The part that's quite interesting, I think we have some charts to show, the choppiness of the market and the uncertainty of the marketand where to put their allocation and we've seen people move into cash or GICs. And when you look at a chart like an LVMH or Hermes or other luxury stocks, you wouldn't even know that there are any issues going on. It's quite amazing.
there are so that you a specific list of companies that would get the benefit of China opening, Nike, Starbucks or Estée Lauder, we are seeing mixed results.
>> Starbucks is supposed to be counting on China fora big growth engine for it.
>> In fact, great, they reported yesterday, there Marchstores, so comparables stores sales were up 30%.
So the activity is there.
What was disappointing for investors and why the stock took back 9% of its market Is that the expectations weren't carried forward for the rest of the year.
So there's this question now. We see in this big move inactivity. Does that continue? Is management telling us that that's not sustainable?
Or is management being very conservative, wanting to lower our expectations to something they can grow into?
So I'd be more on the conservative part. But definitely the activity showed up.
>> Estée Lauder, this is make up, right?
>> Yeah. Does she get to go to the house, you to do things, you want to look good.
I think you have it is one of those companies that's losing steam. Why is that?
>> Not just any makeup, we are talking about prestige makeup.
It's one of those companies we look at the financial… > The kind of stuff that we use and for the camera, proceed.
[laughing] >> Of course. And the margins look… It's really profitable business. If you look at the stock chart for Estée Lauder, Greg, just prior to COVID, around October, it gets the benefit of the reopening and for Estée Lauder, a lot of their sales are tied to travel.
So people are going to go somewhere, they're going to go to duty-free.
They will buy makeup and all of those stores that they see in the airport. They depend on that and so they got the benefit of the doubt.
And much like investors, we had to make assumptions on which companies would benefit from reopening. The management teams have to make assumptions of how much do I order?
How much do I try to sell to the channel, the retail, the end, let's say, merchant that's going to sell to you and me so that we can look good?
And so they made a lot of big assumptions. There is activity, just like we said was Starbucks. There is activity, but they are not converting the customer into those sales, so right now they have a very bloated inventory and bloated channel.
So they make revenue recognition when they sell to the merchant and right now the merchant is just sitting on too much stock. So even provinces like Hynan, which is very popular for a resort area, there is tremendous volume activity but the customer is just not buying the beauty products.
we saw consumer confidence get really impacted with COVID in China. People are coming out, they want to travel, they want to feel good, but they are being a very selective of what they've been their money on.
>>let's talk about travelling, right? Once you start to reopen an economy, people go on vacation, they go about. There's obviously some names that are tied to that.
This one, trip.
com, Ctrip. From the name alone, I'm assuming it has something to do with travel. Am I making a big leap there?
>> So this is they are online each travel company, similar to what people would think of as booking.
com, or TripAdvisor. So yes, it got the benefit of the doubt.
the activity is not as much as our expectations going into it.
I will say for travel and what I've learned just speaking to people on the ground is that a lot of Chinese citizens, their passports expired over COVID.
In many countries, they need to apply for visas. So yes, you're thinking, they're going to go in trouble.
We have seen domestic airline activity exceed pre-COVID levels. International activities still very subdued.
And so when I look at opportunity, there is still a tremendous opportunity probably in the late spring into summer where travellers can get their visas updated, can get their visas, will go to Europe and other countries and start sending money.
>> What are the risks for a name like that?
With the travel rebound, assuming people don't want to go abroad?
>> Yeah, they definitely do want to go abroad.
I think the issue is really getting into the mind of the consumer is that, okay, they might buy A but they might not buy B. I think that has been challenging for investors and it's been just as frustrating for the management teams and sort of if you are selling something that you put on a shelf,you never want to have an empty shelf, but the risk in terms of supplying this product is the oversupply and then you have to work to the inventory.
No different than during the pandemic. We bought too much goods, then the supply chain got tired and it got over delivered and we saw companies have to discount.
So this is the part where the euphoria is over. We are starting to see the dust settle and we are starting to see some companies have been working in we've seen companies like an estay or Starbucks that have taken a step back. But even, talking industrials and materials, we thought that COVID coming away, we thought there would be stimulus. We've seen manufacturing activity kind of be lacklustre versus expectations and we've seen materials like iron ore kind of get a lift up and then have completely retraced or rebounded. So goes across all sectors. So I'd say that initial way of of euphoria has come down.
The enduring sectors, I'd say, have been aerospace and luxury.
>> That was Ben Gossack, four folio manager with TD Asset Management.
Now, let's get to our educational segment of the day.
In choppy markets, you may be concerned about potentially overpaying for a stock or having to sell at a very reduced price.
Well, amid all this heightened volatility, WebBroker has tools to help you potentially manage that risk.
Joining us now with more is Nugwa Haruna. Always a pleasure to see you. Let's talk about was available here on the platform when you're talking about these issues.
>> Right. So it's always a pleasure being here, Greg.
And yes, we now are in, right in the middle of a volatile market. We've been talking about this for over a year now and one of the features of a volatile market is those choppy prices that we mention.
So you might see huge swings and prices that could be downward or upwards and so some investors may decide to sit out trading during this timeframe, but some other investors may look to take advantage of this. So for instance, a decline in prices could be an opportunity to buy into a specific position that some investors may have wanted and the opposite where the prices actually increased could be an opportunity for investors to exit a position. So how can investors take advantage of that? Well, they are able to use certain order types to be able to do that.
So we will touch today on the limit order. Let's go into WebBroker and I will show how you can place a limit order.
In WebBroker, I will click on the buy sell ticket on the top right hand corner of the screen here. That will pull up my trade ticket.
I'm going to use a stock you mentioned today, we will just go with Apple. And I will go with the US listed stock here.
Once I do this, have an opportunity, let's say I own the stock and I'm looking to sell it. Typically, if you're looking to sell something, you're actually looking to make a profit,let's say I own 100 Apple shares and I want to tell it to make a profit. Well, I could potentially use a market order which essentially gives me whatever the market price is, which could end up being slightly more or less than the last price. But if I want to have some control and I'm expecting that prices will stay volatile, there may be a huge spike, I can take advantage of that by using something called a limit order.
I'm going to click on the drop down here, click on limit and here I can place my limit price. So I could say I'm only willing to sell my stocks if the price of the stock goes up $285. Now, this way gives me some control. That is the floor I'm willing to accept.
Anything more than 185 is even better because I make even more of a prophet.
And then, though, I do want to keep in mind that if my limit price is much higher than the current market price, I might be waiting a while for this order to go through. So right under here, using the good detail, I will place a determination on how long I want to wait.
So we know it sometime after noon right now so if I want to wait for the rest of the day until 4 PM because that's when the markets are open until, I can leave it as a day order which means that at 4 PM, if Apple stock does not go up to hundred and 85, my order will cancel.
Or I can click on this drop down and take a look at some of the other options.
I could use a good till specified that lets me choose a specific date or I could use the good till cancelled, and this will let my order stay in the system until it expires. For US listed stocks, that the hundred and 80 calendar days and for Canadian listed stocks, that's 90 calendar days.
>> Okay, so now we have some information here about different kinds of orders that you place to try to manage volatility. Of course, volatility is just not between 9:30 AM Eastern and 4 PM when the market is open.
How can investors trade outside of the standard market hours?
>> And you are correct, Greg.
We just came off earnings season and you will find that when companies make their earnings announcements, either before the markets open or after the markets open, they do this so that it doesn't impact the valuation of their security if they do it during market hours.
But investors can still trade during these time frames.
So within WebBroker, investors can actually place orders between 8 AM and 9:20 AM Eastern standard Time or between 4 and 7 PM Eastern standard Time. See you still have an opportunity to participate in the markets and maybe once again enter or exit a position.
So it's going to WebBroker and I'll show you how you can take advantage of those extended market features that we have.
So still using our example on screen, let's say I do want to so my Apple stock at $185, using this drop down, you will notice that there is an additional option, and that would be the day plus extended markets.
So what this means is if I place this order right now or sometime after 12 PM Eastern standard Time, this order will stay good until 4 PM. And then it will rule into the extended markets, which is for 7 PM. Now, when 7 PM comes around, if I'm unable to sell my stock that hundred and $85, this order will be cancelled which means that tomorrow, I will need to go back in early tomorrow and put this in again. So essentially how the date was extended is a gives you the advantage of utilizing those premarket hours, a 920 or aftermarket hours, 40 7 PM, but it only lasts for that day. Now there are a few things you want to be aware of. Because not a lot of people are trading during this time, there is not that much liquidity and investors might find a lot of volatility during that timeframe as well because that's when some of these announcements are made by companies.
And one more thing investors want to be aware of is that if you are utilizing the extended market option, this is only available with US traded stocks and ETFs, it's not available with Canadian stocks or penny stocks, so just a few things to be aware of if you decide you want to use this.
>> Great stuff as always, Nugwa, thinks that.
>> Thank for having me.
> Nugwa Haruna, senior client education instructor at TD Direct Investing.
And make sure to check out the learning centre in WebBroker for more educational videos, live, interactive master classes and upcoming webinars.
Stock technology stocks had a strong start to the year after pretty challenging 2022, but could that run continue amid some signs of slowing growth?
Cathie Wood, CEO and chief investment officer at ARK Invest joined us earlier to discuss that in her view on the potential for artificial intelligence.
>> ARK's investment time horizon is five years. So yes, long-term, and that's somewhat contrarian in this market but we think it's very important to keep our eyes on the prize and do deep research on how technology is going to evolve.
Now, we think it's going to evolve very quickly during the next few years.
>> Alright, as we talk about this quick evolution, I want to talk about some of these things perhaps you have your eye on. Everyone has been talking for several months now about ChatGPT. Really, the court that, we are talking about artificial intelligence. People are saying the changes there could be swift.
What are you anticipating in the space?
>> We have been doing research on this space ever since ARK was founded in 2014 and we think it's terrific that finally something in the innovation space like ChatGPT has captured both the consumer and the business imagination and is really at helping people understand that the world of innovation is changing very quickly and the changes are pretty profound. I'm not sure if you've experimented with it, but from an educational point of view, it's going to change education, is going to change work completely, even in areas like developers, engineering.
We are seeing coaling productivity go up to fold within less than a year and we actually think that could go up tenfold, but of course it has been an area of great labour shortages. So I know there was also an announcement today, IBM said it was going to hire no more people in the back office. And so for back office worker, ChatGPT and AI generallyis probably going to take the place of human beings.
But in that regard, it's going to take people out of some areas that are tedious, shall we say, and create other opportunities that we think are going to be pretty exciting.
>> Yeah, because that conversation around artificial intelligence, obviously there is excitement about what it can deliver and I have experiments and with some of these apps that you're talking about, but there is also a bit of fear and trepidation among people about change of this scale or a wholesale change, almost, could be pretty disruptive of society.
>> I think you are right, and I think that we are going to need retraining and reeducation, but these technologies are very exciting and also hold great promise for those they get on the right side of change.
So I think just experimenting with ChatGPT, you see the power behind AI and you can also see how you can learn a lot of these new technologies by yourself. For example, with natural language processing, we are all going to become programmers, effectively.
And now, a year ago, most people would think, I could never be a programmer. But now, some of our analysts have used ChatGPT to design their own website, copying another website. And that's in less than a day.
So it's pretty provocative. I think you have to really want to engage with it and experiment and those with initiative and creativity, thing, or when you have a lot of fun and very enjoyable careers.
>> That's one of the big themes right now and AI but that's another thing I noticed saying in the thick of earnings season, we've had some heavyweight tech names reporting. AI is creeping as everyone statements and what they have to say about the future of the business going forward. What are you taking away so far from some the big tech names we've seen this earnings season?
>>well, I think that the larger platforms, the larger social platforms, are taking advertising share from the smaller ones. That's clear and it's been a pretty quick shift, I would say. I think all of them are suffering last year and the larger ones are now grabbing share.
Yes, AI is discussed quite a bit in most of these calls but we think that it's a real risk to a company like Alphabet.
I have never really enjoyed Google searchmyself. I wish it could be smarter. I'm sure we've all had that experience. Well, guess what?
ChatGPT, once they start putting it through and including recent times as well, I think is going to usurp search.
Now, Google or Alphabet says that it's on it, it's on the case and it should be because it has some of the best AI experts in the world. Bought a company called deep mind, but somehow they have been risk-averse and open AI has stolen the merchant with the ChatGPT. The other thingwe are trying to understand is what will be the impact on Apple? It could be that ChatGPT will diss intermediate apps with so-called plug-ins and really just take us directly to wherever we want to go, whatever our website we want to go, it'll anticipated.
So I think while many cap tech has recently come on strong, we are looking at the destruction and disintermediation risks that they are facing as well.
>> These are disruptions that will obviously have a longer term effects on the tech sector and shape going forward. Right now, it's hard to ignore the fact that investors are concerned about slowing growth. We have heard that from some the companies to you in terms of their clients getting a little bit more cautious on spending on the cloud and some other areas, as the Federal Reserve might deliver what the interest rate path is going forward.
What should we be thinking about the rest of this year in terms of some of the volatility going forward?
>> Well, I think thatI think it's accelerating contrary to what Jamie Dimon said after buying First Republic orparts of it. We are seeing, we believe that the Fed, because of the Fed interest rate hikes, a 20 fold increase in one year that deposits are leaving the system and moving into treasury funds. And treasury funds do nothing but sit there. They can't be loaned out. They can't encourage business activity, whereas deposits and banking systems, the other side of those can be loans, and so we have a file that we have started were in the early stages of a credit crunch that is going to be much more serious than I think most are expecting.
I think the regional bank index is beginning to telegraph that. It has broken down, which tells us that deposits will continue to outflow until the Fed reverses its position, until the Fed pivots. And we do see, you mentioned the oil price, I think has defied most people's expectations this year, especially everyone expecting China to come back once it dropped to a zero COVID policy, and that has not happened. So something's going on out there that is broader than even the US. We do believe that there is much more weakness in the global economy that most appreciated and I would say that it's interesting because China was shut down for so long, I think we all expected a little bit more than we've seen.
Some consumers companies have seen some activity but the has not. One of the things going on, it doesn't seem that Russia has been forced to cut production and it seems like it's still selling its production at a discount and that is beginning to affect the rest of the market.
>> That was Cathie Wood, CEO of ARK Invest.
Let's check in on the markets right now.
We got a bit of a bounce back on this Friday, the last trading day of the week, right now the TSX Composite Index is up 1.3%, 255 points to the upside.
We saw some studying at least in the price of American benchmark crude yesterday from the dramatic drops of earlier in the week,and today we are gaining some of that back. He got American benchmark crude up about two bucks and $0.60 per barrel, back above 70. It's benefiting some energy names including Cenovus. I 2127, it's up we will call at 3% to the upside.
Gold is pulling back of it today as investors calmed down a little bit after a pretty choppy ride this week.
You got the price of gold down about 34 bucks, and you've got some of the gold-mining names down as well.
Can't Kinross at 715 per share is down 1/4%. So the border it's beena big week, a slew of earnings, murmured turmoil in the regional banks in the United States, but today some green on the screen.
57 points the upside, up 1.4% for the broader read of the market.
check out the tech heavy NASDAQ and see how it's fearing right now against the broader market. A little bit better. 1 3/4 of a percent to the upside.
And Carvana, the stock making fairly big moves today.
It's a used car retailer. It says it's going to become profitable on an adjusted basis sooner than expected, talking about the second quarter. At nine bucks and $0.30 per share, it's up 29%.
We talked about cars, let's talk about the US auto sector.
Shifting into a higher gear in April as inventories begin to recover. Our Anthony Okolie has been digging into these latest sales figures and has some commentary from TD Economics.
>>It's a very strong start for US auto sales for the second quarter. April saw sales up more than 7% month over month, that equates to over 16 million units annualized.
On an adjusted sales volume spaces, sales were up pretty strong, 9% year-over-year. Now again, we are seeing his dealership inventories continue to bounce back from last summer's lows and so there is an improvement in the average daily selling rate as well.
It rose to about 51,000 cars sold over the past 26 Days in April, that's up versus about 46000 Daily Rate in April of last year.
Breaking it down by vehicle type, passenger vehicles actually shot up 11% year-over-year, edging out light trucks which were only up about 8% year-over-year.
Again, light trucks accounted for the bulk of April sales, around 79%, so that's equal to the share that it had back in April 2022.
Now, TD Economics says that light vehicle sales in April, the gains mark to the eighth consecutive gains indicating that it's a pretty strong start to the spring buying season for US vehicles.
Now, what's driving it?
Pent-up demand is really boosting those sales.
Sales are actually just 2.6% the April 2019 levels. So quite strong. Despite the pickup that we saw in passenger vehicles, and many automakers continue to focus on the larger vehicles like compact SUVs, full-sized pickup trucks, midsize SUVs, which are also likely the most expensive products as well. Companies like Ford, Hyundai and Chevrolet, we've seen it that they discontinued smaller vehicles and are focusing again on producing SUVs and trucks.
Overall, it was a strong start to the second quarter.
While inventories did fall modestly in April, TD Economics says that it will be short-lived and, as auto production increases over the coming months, likely because of improved supply chain pressure.
Greg?
> Okay, so that's what's behind this. What does TD Economics think about the months and the rest of the year and maybe even some risks to all this?
>> I think they are looking for sales to rise 12% year-over-year to just over 15 million units.
production is expected to increase this year to just about 5% year-over-year. Full normalization to pre-pandemic levels won't happen until 2024.
Some of the risks, it's inflation remains higher for longer, could prompt the Fed to continue to raise rates and that's going to put pressure on borrowers. Of course, it will increase the borrowing rate.
Then, we could see higher level of demand instruction as well.
>> Fascinating stuff. Thanks, Anthony.
>> My pleasure.
>> MoneyTalk's Anthony Okolie.
You want to stay tuned for Monday show. James Dixon, Dir.
of family office solution that TD Securities will be our guest, take your questions about market trends. A reminder, course, you can get a head start on those questions.
Just email moneytalklive@td.com. On behalf of Anthony and me here on the desk and everyone behind the scenes producing the show every day, thanks for watching all week and will see you next week.
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