Below is a summary of some of the relevant news items from the Capital Markets and the Economy from the past week extracted from RBC Global Insights and FactSet Research.

 

Markets

Market scorecard as of close on Friday February 17, 2023.

Country	Equity Indices	Level	1 week	YTD
Canada	S&P/TSX Composite	20,515	-0.5%	5.8%
U.S.	S&P 500	4,079	-0.3%	6.2%
U.S.	NASDAQ	11,787	0.6%	12.6%
Europe/Asia	MSCI EAFE	2,087	0.1%	7.4%

Source: Bloomberg, RBC Wealth Management

• TSX ended lower Friday, just off worst levels. Sectors mixed, energy and materials the big decliners with tech and industrials also weaker. Health care and communication services the upside standouts with utilities, consumer discretionary, staples, real estate and financial also higher. Canadian equities posted a 0.5% weekly decline, lower for second straight week after a stretch of five straight weekly gains to start 2023.

• US equities were mostly lower Friday trading, though ended near best levels. However, the S&P still extended Thursday's worst performance for the index in nearly a month. S&P also posted second-straight weekly decline though Nasdaq modestly higher for the week. Energy the outsized decliner on crude weakness.

• Markets were closed on Monday February 20 in observance of Family Day (Canada) and Presidents Day (U.S.)

 

Economy

Canada

• The Canadian labour market was exceptionally robust in January, with the economy adding 150,000 new jobs compared to expectations for 15,000. While this conflicts with the most recent Bank of Canada (BoC) Business Outlook Survey that showed firms planned to hire fewer individuals, we note that a fair portion of the growth was driven by less economically sensitive industries and/or sectors that have hired less aggressively over the past year.

U.S. 

• The Consumer Price Index (CPI) measure of inflation for January was higher than anticipated, with the 6.4% y/y increase coming in above consensus expectations of 6.2%, although the increase was largely attributable to shelter costs. The outcome of this report is that it may push the central bank to raise rates higher than the market is anticipating.

• The most recent nonfarm payroll report showed over 500,000 net jobs created in January 2023, above even the highest projection in Bloomberg’s pre-release survey. Part of the reported growth is likely a statistical aberration related to seasonal adjustments, and we would expect that to reverse in upcoming months. What is open to question is what is driving this employment: is it an inflationary pull by employers paying up for additional workers, or is it a less inflationary supply push as sidelined workers—stressed by rising consumer prices—return to the labor force? We believe both factors are at play, but, on balance, the less inflationary supply push is what likely drove much of the January hiring.

Further Afield

• The European Commission has proposed speeding up and simplifying the approval of green-finance tools, thus supporting the transition to a green and digital economy. It also calls on national governments to introduce tax breaks and subsidies for green investments and urges an increase in funding.

• New home prices in 70 Chinese cities remained stable in January after declining for 16 consecutive months. Secondary market existing home prices declined 0.25% in January compared to a 0.41% decline in December. We think it is encouraging to see early signs of stabilization of property prices. The recovery of the physical housing market would provide relief to the funding issues of some property developers.

 

Notes About Companies in Model Portfolio

• Coca-Cola (KO) reported Q4 and full year 2022 Results. Net revenues grew 7% for the quarter and 11% for the full year. Operating Income grew 24% for the quarter and 6% for the full year. 4Q'22 results were solid with a topline beat and in line EPS, with upside in North America and emerging markets. KO provided a better than expected FY'23 organic sales and constant currency EPS growth guidance with elevated but improved FX headwind, resulting in +4-5% EPS growth.

• TC Energy Corporation (TRP) released its fourth quarter and full year 2022 results. Q4 net losses attributable to common shares of $1.4 billion or $1.42 per common share, compared to net income of $1.1 billion or $1.14 per common share in Q4 2021. For the year 2022 net income attributable to common shares of $0.6 billion or $0.64 per common share, compared to net income of $1.8 billion or $1.87 per common share in 2021. TC Energy's Board of Directors approved a 3.3 per cent increase in the quarterly common share dividend to $0.93 per common share for the quarter ending March 31, 2023.

• Nutrien (NTR) reports Q4 EPS $2.02 and revenues of $7.53B. Retail segment performance was better than expected due to stronger sales and better margins (10% EBITDA margin actual vs. 6% RBC estimate). RBC Capital Markets thinks Nutrien slowing down the ramp-up of idled potash capacity and highlighting a flexible approach to production will be welcomed by investors, along with the 10% dividend increase and approval of another 5% share repurchase program.

• Waste Connections (WCN) reported Q4/22 adjusted EBITDA of $564MM (+14% y/y) above street expectations of $555MM. Revenue of $1,869MM was in line and margins of 30.2% were in line with management’s guidance for 30%. WCN is an integrated solid waste services company that provides solid waste collection, transfer, disposal and recycling services in mostly exclusive and secondary markets operating in 43 US states and six provinces in Canada.

 

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Regards,

Shiuman