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 iShares MSCI ACWI EX-US Index ETF (ACWX) & Dow Jones Transportation Average (DTX.I)

What had been a choppy week for stock markets in North America with trading impacted by the US Thanksgiving holiday weekend ended on a very strong note yesterday with major US indices gaining 2.2% to 4.4%. Yesterday afternoon, equities started to accelerate upward once again after Fed Chair Powell indicated that slowing the pace of interest rate increases could start as soon the FOMC’s December meeting but also reiterated that the terminal interest rate for this hiking cycle may still move up higher than previously thought.

Powell’s comments also sent US treasury yields and the US Dollar into reverse, igniting rallies in commodities, non-US currencies, and bonds, including gains of 1.1% for Gold, 2.9% for WTI Crude Oil an 4.0% for Copper.

A shift in the Fed’s previously hawkish stance appears to have been influenced by signs of easing inflation such as the better-than-expected US consumer price index report released earlier this month and signs of a softening economy. Early Black Friday/Cyber Monday reports suggested robust traffic, particularly for online sales, but sales growth appears to have been less than inflation, and yesterday ADP reported weaker than expected US private sector payroll growth alongside poor Chicago PMI and Pending Home Sales numbers.

The coming week is another busy one for economic news. Although the Fed’s pre-meeting blackout on public FOMC member commentary starts, there is still a lot of potential news on the way for investors to chew on. Friday brings the US nonfarm payrolls and Canada employment reports where investors may look as much at the wage inflation reports as at the headline job creation numbers. Next week brings Service PMI reports from around the world, and trade data for the US, Canada and China.

Perhaps most importantly, the Bank of Canada and the Reserve Bank of Australia are holding meetings. Both of these central banks have been slowing the pace of their own interest rate increases which could set the stage for the mid-December Fed decision. Any comments related to inflation and economic conditions heading into 2023 may also attract attention from investors.

With Canadian banks reporting mixed results so far this week, and increasing loan loss provisions, earnings season is now pretty much over. The coming week does bring a few more numbers from retailers headlined by Dollarama and GameStop Tuesday, followed by Costco Wholesale and Lululemon Athetlica on Wednesday.

In this edition of the Equity Leaders Weekly, we take a look at the current rebound in international equities and what transportation stocks are telling us about US equity market sentiment.


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