Market developments
Equities:
Technology stocks tumbled, dragging down the broader market and trimming the monthly rally fueled by hopes of Fed rate cuts. As inflation cools, interest rate cuts could provide a tailwind for growth-oriented tech stocks by boosting cash flows for investments and acquisitions. AI, cloud computing, and 5G trends are also driving demand in parts of the tech sector. The TSX also closed lower this week as Bank of Montreal earnings missed analyst estimates, offsetting the stronger report and performance of Royal Bank of Canada.
Fixed income:
U.S. treasuries had their best month of 2024 as the price gage for personal consumption expenditures came in line with expectations. The Fed will likely need to see more consistent favourable data before initiating the first rate cut and traders are currently pricing in a 50% probability for that to happen by mid September. The Bank of Canada and ECB are likely to begin easing earlier than the U.S., as the market is expecting the announcement of the first rate cut to come as early as next week.
Commodities:
Oil prices fell for the third consecutive day on Friday and closed lower for the week. This decline occurred despite the U.S. inflation data meeting expectations, as the market awaits the OPEC+ meeting this weekend where production cuts are expected to be extended into the third quarter or beyond.