U.S. retail sales for August increased

Posted: Friday, September 14, 2018 - 09:31 EDT

U.S. retail sales for August increased by 0.1% for the month, which came in below expectations of 0.4%.  Despite spending coming in below consensus estimates, the prior month was positively revised higher from 0.5% to 0.7%.  In August, clothing was the largest downside contributor with motor vehicle sales also showing declines.  Spending at gasoline stations continues to show strong gains as energy prices remain near the highest levels during this year.  Excluding autos and gas, retail sales increased marginally higher at 0.2% during the month.  Today’s retail sales data will likely revise down Q3 growth estimates incrementally, although the U.S. economy remains robust and should still support the Fed’s rate hike path.  Current implied probabilities still show a 97.5% likelihood that the Fed raises rates at the September 26 meeting.

Late yesterday afternoon, S&P downgraded Hydro One Inc. by one notch to A- with the company’s outlook remaining at negative.  The rating agency cited that the recent Ontario provincial government interjection into Hydro One’s operations were viewed negatively.  This implied a lack of independence by the board of the company, along with management.  The business risk of Hydro One continues to be supported by its strong regulated utility business although the financial metrics remain weak as a result of the potential Avista transaction closing.  The new issue Canadian corporate market was again active yesterday with TD re-opening its 3-year deposit note that raised $1bil at +64bps over the curve.  FortisAlberta also raised incremental funding of $150mil long bonds at +139bps over the curve.  Rating agency and corporate issuer news dominated headlines and flows yesterday.  With the exception of AltaGas and Hydro One, that ended the day wider, spreads on most secondary offerings ended the day mostly unchanged even with the large issuance size.

Equity Markets:

 

  Index Level % Change QTD YTD Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018
S&P 500 2,904.18 0.53% 7.29% 10.13% 6.07% 3.09% 4.48% 6.64% -0.76% 3.43%
TSX

16,001.71

-0.29%

-1.16%

0.77%

2.41% -1.64% 3.68% 4.44% -4.52% 6.77%

Rates:

 

Today

% Change

QTD change

YTD change

Q1 2017

Q2 2017

Q3 2017

Q4 2017

Q1 2018

Q2 2018

Canada 5 Year

2.28%

0.02% 0.21% 0.41% 1.12% 1.39% 1.75% 1.87% 1.97% 2.07%
Canada 10 Year 2.36% 0.02% 0.19% 0.32% 1.63% 1.76% 2.10% 2.05% 2.09% 2.17%
Canada 30 Year 2.37% 0.02% 0.17% 0.10% 2.30% 2.15% 2.47% 2.27% 2.23% 2.21%
30yr Generic Corporate A rated Spread 1.28% 0.00% 0.04% 0.04% 1.33% 1.21% 1.24% 1.21% 1.24% 1.24%
30yr All-in Corporate A rated Yield

3.65%

0.02% 0.21% 0.14% 3.63% 3.36% 3.71% 3.48% 3.47% 3.45%
US 10 Year 2.98% 0.01% 0.12% 0.58% 2.39% 2.31% 2.33% 2.41% 2.74% 2.86%
CDX IG 55.746 0.206                

The information contained herein is intended for advisors for general information only and is compiled from sources believed to be reliable, but no representation or warranty, express or implied, is made as to its accuracy. All opinions contained in the commentary and expressed by the portfolio manager are subject to change without notice and are provided in good faith without legal responsibility. All market data is sourced from Bloomberg.