Stocks accelerated their rebound on Thursday. The S&P 500 was up a hefty 1.9% and Toronto was up a somewhat stunning 2.9%.
It appears that the market is betting that we have likely seen the top of the interest rate cycle.
Shopify surged 21% after posting strong earnings.
Starbucks was up 9.5% also after releasing strong earnings.
AutoCanada was up 6.3%. I’m hoping that they had a good quarter because of higher vehicle prices and less competition between dealers. But that remains to be seen.
Tomorrow’s big news will be the U.S. jobs report. The market may get spooked if it comes in hot since that might suggest a need for higher interest rates.
Last night I saw a headline about Enbridge’s dividends. They announced that the new reset dividend on ENB.PR.N will be 6.696%. That’s of course applied to its $25 par or issue price and amounts to $1.674 per year. Those shares closed today at $18.61. So the yield on that price is 9.0%. That strikes me as high. Should it really be the case that investors need 9.0% to be enticed to buy these Enbridge rate reset shares? Unless inflation is quite persistent I think 9.0% for five years seems quite attractive. There is always some risk that Enbridge runs into financial difficulty but that seems unlikely. There is also the risk that the reset in 5 years time will be at a far lower dividend. But if that turns out to be true than the opportunity to collect 9.0% for five years seems attractive. Anything can happen but it surprises me how high the yields on rate resets have gone.
TransAlta announced an acquisition today. While I have not done a full analysis and while the company does not have a great track record it does look set to do well. I’m thinking of buying a small amount of shares.