TORONTO - The Toronto stock market is entering the last full week of November trading amid another wave of worry about the strength of an economic rebound, while investors will get a look at the health of the big Canadian banks.
The market is on track to a solid gain for November, carrying on a recent pattern where market slippage has been short-lived as investors buy into dips.
Buyers have managed to stay optimistic despite the growing realization that the recession won't be giving way to a period rapid growth, as has been seen with other contractions that were not caused by the financial sector.
"Last year, it was sell the rally - any time the markets perked their heads up at all, they were getting pounded," observed Colin Cieszynski, market analyst at CMC Markets Canada.
"And this year, it's been a more 'buy on the dips' mentality, which is actually indicative of a longer-term bullish trend under way."
Bank of Montreal (TSX:BMO) kicks off the quarterly - and full-year - earnings season for the big Canadian banks on Tuesday. The feeling is that the results should be well received, reflecting the fact the Canadian economy has weathered the recession relatively well.
"I think it will be fair to say it's expected to grow stronger than that in the U.S.," said Phillip Petursson, director of institutional equities at MFC Global Investment Management.
"Our unemployment rate is lower than that in the U.S., our consumer doesn't have the same level of indebtedness as in the U.S. So loan loss provisions out of the Canadian banks should actually be better than what we would have expected three or six months ago."
Canadian banks - unlike their U.S. counterparts - have made it through the financial crisis without cutting dividends. But it's unlikely investors will see banks in a hurry to hike them.
"I suspect it's a little bit early," said Cieszynski.
"I suspect you will see business as usual and they'll hold the line for now and probably wait until they see some more traction in the economy."
Last week's move leaves the TSX up 28.8 per cent for the year to date - and an impressive 53 per cent from the lows of early March.
It would be a bit much to expect the TSX to keep up that sort of momentum - but analysts say that doesn't mean the market will stall out here.
"It's based on the fact that the earnings outlook going forward two, three, four quarters is quite strong," Petursson said.
"Earnings growth is expected to grow in the range of 15 to 25 per cent over the next four quarters. You couple that with a very reasonable valuation on the markets today and there is reason to be more optimistic."
The week will be an off week for stock markets, since the U.S. markets are closed Thursday for the U.S. Thanksgiving holiday, then reopen for a shortened session on Friday.
Canadian retail sales for September come out on Monday and economists expect the data to show a rise of 0.6 per cent from August, when sales rose 0.8 per cent.
BMO Capital Markets has higher hopes, expecting a one per cent rise in retail sales "against a background of two consecutive monthly job gains, historically low borrowing costs and seven straight monthly increases in consumer confidence."
In the United States, existing home sales data for October is also released on Monday. The consensus estimate calls for sales at an annual rate to rise 2.3 per cent to 5.7 million units.
New home sales data come out Wednesday amid expectations of a rise of 1.4 per cent to an annual rate of 408,000.
The Conference Board's November index of consumer confidence is out Tuesday. This report is key as American consumer spending accounts for 70 per cent of the U.S. gross domestic product growth.
Economists expect its index to come in at 48.1 following a 47.7 reading in October.