Market week: Stocks tick down on the week
Proposed U.S. tax hikes dampen sentiment
Stock markets declined broadly on the week as U.S. investor sentiment was dampened on Thursday by reports that President Joe Biden will fulfill an election promise and propose hiking capital gains tax on wealthy Americans by an eye-watering 20 percentage points – in effect, a wealth tax. U.S. inflation also notched up in March, raising concerns about an earlier-than-exected tightening by the Fed next year. The big stock indexes rebounded somewhat on Friday, bolstered by strong readings in key manufacturing and service indexes, and a surge in new home sales at the fastest rate since 2006.
In the U.S. the IHS Markit manufacturing index climbed to 60.5 in April, a record high, from 59.1 in March. The services index, meanwhile, also jumped in April, climbing to 63.1 from 60.4 in March. A reading over 50 in any month indicates growth in the sector. U.S. all-items inflation rose at an annualized 2.6% rate in March, while core inflation, which excludes volatile food and energy prices, rose at an annualized 1.6%.
In Canada, all-items March inflation was reported at an annualized 2.2%, double February’s rate, while core inflation, excluding food and energy prices, remained quiet, at an annualized 0.9%. Of course, interest rates were kept unchanged for now. Meanwhile, the Bank of Canada left policy rates unchanged at its rate announcement on Wednesday, and is willing to let inflation overshoot the 2% mark, but said it would go ahead with a reduction in the pace of bond purchases, leading to an uptick in the Canadian/U.S. dollar exchange rate to over $0.80 by Friday’s close.
With the tussle between Canadian Pacific Railway Ltd. (TSX: CP) and Canadian National Railway Co. (TSX: CNR) over competing bids for U.S. rail carrier Kansas City Southern (NYSE: KSU), the S&P/TSX Capped Industrials Index, of which the two railroads are the largest-cap components, fell 2.0% on the week. That weighed on Toronto’s stock market benchmark, the S&P/TSX Composite Index, which closed Friday with a weekly loss of 1.3%, as the price of crude oil fell 1.6% on the week, while gold ended about flat.
* Evolve closes gold ETF. Evolve Funds Group announced on April 21 that it will shut down Evolve Gold Miners Fund (NEO: GLC) on or about June 25, 2021. The fund debuted on May 24 2019, and was listed on the NEO exchange on Sept. 25, 2020. It posted $1.5 million in assets under management as of April 22.
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