That was not how investors wanted to enter a long weekend… major North American indices struggled mightily to close out the week with the S&P/TSX dipping below its 200-day moving average (15,981). The euphoria behind NAFTA 2.0 was short lived with investors turning their attention to bond yields which have pushed above their May peak to multi-year-highs. South of the border, the U.S. 10-year note yield rose to 3.24% and hit a level not seen since 2011 high, while the two-year note advanced to 2.897%.
The culprit? Strong economic data on both sides of the border. Canada recorded its best monthly job number this year with employment increasing by 63,300 in September, on a more than 80,000 gain in part-time work. Economists were anticipating a 25,000 increase on the month. Canada also recorded its first trade surplus in more than 18 months in August as unusually timed shutdowns at auto plants helped cut imports at a greater rate than exports. The surplus of $526 million was the first since December 2016. U.S. data released Friday showed that their services sector grew at its fastest rate on record last month. While all this is good for the overall economy, it means that Federal Banks are likely to take a more aggressive path on future rate hikes. Comments from U.S. Federal Reserve Chair Jerome Powell echoed this notion on Wednesday when he said that the Fed had a long way to go before interest rates would hit neutral, suggesting to markets that more hikes could be coming.