“Green” is the colour of the day as the steady stream of positive profit reports garners attention against a noticeable lack of negative economic data. Retailers continue to report robust earnings, with Staples and Target the latest to beat estimates and raise full-year forecasts. Deere also reported higher than expected profits on a 22% climb in sales over the last year. Dell missed the mark last night. With earnings season winding down, per-share profits has clocked a hefty 17% growth rate over last year’s second quarter, significantly higher than was expected heading into the season. After a brutal start to the month, in terms of both stock prices and economic figures, the tone has improved substantially. The TSX has clawed back almost all of the month’s decline, and economic indicators from retail sales to job growth to industrial production have all been significantly healthier than forecast. The TSX is up 160 pts this morning. The Dow is up 99 pts.
The Canadian dollar is up 38 bps to US$1.0220 as oil prices climb to a two-week high. Bond yields are holding steady at 1.57% for the 5-year Canada and 2.45% for the ten. Gold is up $3 to US$1788/oz. Oil is up $1.50 to US$88.19/barrel.
With the bond rates close to their lows there is room for the lenders to reduce interest rates on their fixed term products. We have already seem some lenders drop the interest rate on their five year fixe terms with many now around 3.59%. There are some lower rates available for mortgages that close within 45 days.
One of indicators that predicts the Bank of Canada’s next move did a 180 degree turn last week from predicting that the bank would increase their overnight this year to the chance that the Bank of Canada might actually drop rates this year. I don’t think thiswill change the discounts that lenders are offering but it could reduce the actual interest rate on the variable rates mortgages.
