August 7, 2016

% to $15.05.

On Friday, the S&P 500 rose 0.9% to a new closing high. This was driven by a strong U.S. jobs report. And Toronto rose 0.8% despite a weak Canadian jobs report.

Bank of America was up 3.9% to $15.05.

Constellation Software was up 3.6%.

Boston Pizza Royalties units were up 2.5% to $21.73. (It reports earnings on Thursday)

AutoCanada was up 3.9% after reporting Q2 earnings.

Stantec was down another 1.5% as further reaction to its Q2 earnings report.

Berkshire Hathaway reported earnings after the close on Friday. It was interesting to see that Berkshire appeared to have no exposure at all to the Fort McMurray fires. I thought it might have a small exposure through its re-insurance operations. Interestingly, Berkshire indicated that it is refraining from accepting certain property catastrophic coverages as it believes market rates for that insurance are too low.

Overall, Berkshire’s report revealed some slowness in the U.S. economy but its manufactured housing sales were up. This bodes well for Toll Brothers which I think will have a good earnings report (on August 23). Toll Brothers could report strong profit growth based on house deals it made last year named may also report strong deals being signed in the latest quarter. Houses remain FAR more affordable in the U.S. than in Canada and U.S. house prices are likely to increase.

Canada’s jobs report was weak and included the following:

After three months of little change, employment declined by 31,000 (-0.2%) in July. The unemployment rate increased 0.1 percentage point to 6.9%.

Full-time employment fell by 71,000 from June to July, while part-time work was up by 40,000.

Compared with 12 months earlier, total employment increased by 71,000 or 0.4%, with all of the growth in part-time work. Over the same period, the total number of hours worked rose by 0.4%. 

In July, employment decreased among youths aged 15 to 24, while it was little changed for the other demographic groups.

Employment declined in Ontario and Newfoundland and Labrador, and increased in British Columbia and New Brunswick.

Fewer people were employed in public administration in July, while employment in health care and social assistance increased.

The number of public sector employees fell in July, and there was little change in the number of private sector employees and self-employed workers.

While this is negative, it is also not really surprising given the down-turn in most commodities. This survey is only accurate to about plus or minus 29,000 and so one month of data should not be taken too seriously. The survey indicated that public sector jobs were down by 42,000 in July. That is more than a little bit hard to believe.

Canada’s trade deficit also widened.

Canada’s imports increased 0.8% to $45.0 billion in June. Import volumes were up 0.7% and prices rose 0.2%. Exports increased 0.6% to $41.4 billion, as prices were up 2.0%, while volumes fell 1.4%. As a result, Canada’s merchandise trade deficit with the world widened from $3.5 billion in May to a record $3.6 billion in June.

In the second quarter, imports decreased 1.4% to $134.7 billion. Exports dropped 4.7% to $124.0 billion, the largest decline since the second quarter of 2009. Consequently, Canada’s quarterly trade deficit with the world widened from $6.4 billion in the first quarter of 2016 to a record $10.7 billion in the second quarter.

This is negative for the economy especially since it seems to be more of a trend and not just a one month report.