Daily market snapshot

Thursday, 07/10/2025 p.m.

• Stocks rally to new highs – The S&P 500 and Nasdaq hit new record highs today, as markets appeared to brush off tariff concerns, with Canadian equities also gaining on the day. Small-cap equities performed even better, with the Russell 2000 up 0.5%, extending its gains over the past five days to 1.7%. However, this index remains some 7% off its all-time high seen in November of last year*. Meanwhile, an early sell-off in U.S. government bonds was reversed after a well-received auction for 30-year Treasuries, and the U.S. dollar was stable against a trade-weighted basket of international currencies. In commodity markets, oil prices continued to slide following yesterday's stronger-than-expected U.S. supply data and more subdued demand forecasts from OPEC**. News reports suggest that OPEC+ countries are discussing a pause in planned production increases from October*.
   
• A new day, a new tariff – President Trump has threatened a 50% tariff on goods imported from Brazil, unless legal proceedings against former President Bolsonaro are halted*. The U.S. imported $42 billion in goods from Brazil last year*, implying a $21 billion effective annual tax on this trade if implemented and sustained at these levels. This follows a host of tariff announcements this week, with the administration setting new reciprocal tariff rates for many trade partners to come into force on August 1, unless trade agreements can be reached beforehand*. The president also clarified yesterday that the proposed 50% tariff on copper, the world's third most widely used metal, will go into effect at the same time**, driving a rise in copper futures prices*. The U.S. produces just half of the copper it consumes each year***, meaning that domestic industries using this metal in their production process would face steep increases in costs. For now, the market is seemingly looking through much of this tariff news in anticipation that trade deals, or further delays, mitigate their impact. However, the risk of deeper disruptions to the economy and markets from tariffs is rising again, in our view. 
   
• Few signs of labor-market distress – New claims for unemployment insurance fell again last week and continue to trend at low levels, with firms seemingly reluctant to let go of staff*. However, continuing claims, a measure of people receiving ongoing benefits, continues to rise, and at nearly 2 million stands at the highest level seen since late 2021*. This is consistent with cautious hiring, which may well reflect uncertainty in the corporate sector over the outlook for trade policy and the economy. The Fed is also struggling to see through this fog, and the minutes from its June meeting released yesterday suggest that most members are happy to wait and see how trade developments, and their impact on the real economy, evolve before changing policy****. This makes any cut at the upcoming meeting in late July unlikely, but a September move is possible, in our view, depending on how data on inflation and the labor market shape up over the summer.
   

Investment Strategy

^{*Bloomberg 
**FactSet
***Reuters
**** U.S. Federal Reserve Bank} 

• Stocks rise amid new tariff announcements – The TSX and U.S. equity markets closed higher on Wednesday, as President Trump announced new tariffs on seven countries. Utility and technology stocks led to the upside, while the consumer staples and energy sectors lagged. In international markets, Asia finished mixed overnight, as China's CPI inflation rose to 0.1% annualized in June, above forecasts for a smaller increase to 0.0%.* The U.S. dollar declined against major international currencies. In commodity markets, WTI crude oil traded lower, as U.S. supply stocks rose unexpectedly.*
   
• Trade remains in focus – President Trump has announced new tariffs on 21 countries this week, with tariff rates in the 20%-40% range.** For countries not reaching trade deals, new tariffs are scheduled to be applied on August 1, which is an extension from the previously announced July 9 end to the 90-day pause. The new tariffs are modestly lower overall — by about three percentage points on average — from those announced on April 2, perhaps signaling some flexibility. Vietnam secured a trade deal with the U.S. on July 2 that imposes a 20% tariff on imported goods originating within that country, a significant drop from the 46% figure announced in April.* The U.K. previously reached a trade agreement that charges 10% duties on exports to the U.S. Based on announced trade deals, though a small sample size of just two, reductions from announced tariff rates appear to be achievable, in our view. We believe any progress in finalizing trade agreements over the coming weeks and months should reduce uncertainty, while any flexibility in lowering tariffs should help contain inflation and growth concerns.
   
• Bond yields edge lower – Bond yields fell, with the 10-year Government of Canada yield at 3.34% and the 10-year U.S. Treasury yield at 4.34%. The U.S. Treasury auctioned $39 billion of 10-year notes and $65 billion of four-month bills today, which were well-received by markets. Over the coming months, the Treasury will seek to replenish its general account, which was drawn down over the first half of the year. Since reaching the debt ceiling in January, government budget deficits have been funded by account balances and investments. The new tax and spending package – the One Big Beautiful Bill Act – raised the debt ceiling by $5 trillion on July 4, allowing for the Treasury to issue new debt to fund deficits.
   

Brian Therien, CFA
Investment Strategy

^{*FactSet **Whitehouse.gov}

• US stocks stumble – US large cap equities were mostly lower today, with the S&P 500 large cap index down 0.1%, the Dow Jones falling 0.4% and the NASDAQ broadly flat, while Canadian equities also faltered (-0.4%)*. Small cap stocks were the best performers, with the Russel 2000 index up 0.8% *. This followed a mixed tone in overnight equity markets, with major Asian indexes up, but European markets struggling*. Bonds sold off globally, in a move that looks to have originated in Japan as markets fret over the implications of the upcoming election for the fiscal outlook*. However, US Treasuries pared losses late in the trading session to leave yields broadly unchanged over the day. Finally, oil is up 0.5%, the dollar appreciated by 0.4% against a trade weighted basket of currencies, and copper futures spiked nearly 10% to new record highs after the President threatened to increase tariffs*.br>  
• Tariffs back in the spotlight – The Trump administration announced new reciprocal tariff rates for many of its major trading partners yesterday and warned today that if trade deals cannot be agreed then these would be strictly enforced at the August 1st deadline*. The President also announced an intention to raise tariffs on copper imports to 50%, albeit without specifying when this new rate would go into effect*. Chile is by far the largest exporter of copper to the US, although Canada accounts for around 15% of imports**. Finally, Trump warned that pharmaceutical tariffs could spike as high as 200% unless companies start producing these products in the US over the next 18 months*. The renewed headlines around tariffs have shifted market attention back to trade policy and could cause spikes in volatility over the summer. In our view, agreements with major trade partners should avert the worst of the threatened tariff increases, but this week's announcements highlight the risk of a more disruptive path for trade policy. 
   
• A quiet week on the economic data front – Markets will have limited macro data to digest this week, with the minutes from the June Federal Reserve Bank meeting, released Wednesday, and initial unemployment insurance claims, due Thursday, the highlights. Today's NFIB small business sentiment survey showed a small decline in confidence as firms penciled in a more cautious outlook for sales and hiring*. At the same time, a greater share of small business owners are signaling an intention to raise prices*, likely reflecting the impact of tariff increases already put in place. Indeed, we think the impact of tariffs will be more pronounced across inflation and activity data over coming months, as firms are forced to pass these increased costs through to consumers in the face of squeezed margins. However, we don’t think this headwind will be severe enough to threaten the business cycle, with growth most likely to slow as opposed to stall.

James McCan
Investment Strategy

^*Bloomberg

^{**National Minerals Information Center}
 

• Stocks close lower on new tariff announcements – The TSX and U.S. equity markets closed lower on Monday to start a quiet week for new economic data. Utility and consumer staples stocks posted gains, while the consumer discretionary and materials sectors lagged. In international markets, Asia finished mixed overnight, while Europe was up as Eurozone retail sales growth cooled to 1.8% annualized in May, ahead of estimates for a sharper slowdown.* The U.S. dollar advanced against major international currencies. In commodity markets, WTI oil traded higher amid a tight supply market despite OPEC+ hiking output more than expected at its July 6 meeting.*br>  
• Trade remains in focus – President Trump announced new tariffs today, including 25% levies on goods imported from Japan, South Korea, Malaysia and Kazakhstan.* South Africa will face 30% duties. If the countries don't reach trade deals in July, new tariffs are scheduled to be applied on August 1, which is an extension from the previously-announced July 9 end to the 90-day pause. Trump also announced separately that countries aligning with certain policies of the BRICS bloc of developing countries would face an additional 10% tariff. BRICS countries, which include Brazil, Russia, India, China and South Africa, are currently meeting for a two-day summit in Brazil. While progress on ongoing trade negotiations or new trade agreements could provide some clarity over the coming days, the tariff rates announced today appear to be higher than markets expected, raising inflation and growth concerns. 
   
• Bond yields tick up – Bond yields rose, with the 10-year Government of Canada yield at 3.38% and the 10-year U.S. Treasury yield at 4.39%. The broader trend for the U.S. benchmark yield has been lower, pulling back from its May peak near 4.60%. Bond markets have dialed back expectations for Fed interest rate cuts to two this year, down from three** following the Nonfarm payroll report that showed stronger-than-expected job gains in June. We believe the labor market remains healthy but is cooling from a position of strength, which should allow the Fed to stay on the sidelines a while longer to gain greater clarity on the impact of tariffs on inflation. We expect the Fed to be able to cut interest rates in September or October. Lower interest rates should reduce borrowing costs for businesses and consumers, which is supportive of the economy and corporate profits, in our view.

Brian Therien, CFA
Investment Strategy

^{*FactSet
**CME FedWatch}
 

Thursday, 07/3/2025 p.m.

• Upside surprise in payrolls sparks pre-holiday rally – Markets delivered strong gains* in today's holiday-shortened trading session after a better-than-expected June U.S. labour report. Major U.S. large- and small-cap indexes jumped between 0.75%-1.0% over the day*, while Canadian equities were also up, albeit by a more moderate 0.5%*. Meanwhile, traders trimmed expectations for Fed easing this year in the wake of this data, with 51 basis points (0.51%) of easing now priced over this year in total, compared with 65 basis points at close of play yesterday**. This shift appears to be driving a broader sell-off in Treasury markets, with the 2-year yield up 10 basis points and the 10-year yield up 6 basis points* at market close. Finally, the trade-weighted dollar staged a modest rally, rising 0.45% on the day **, helped by reassuring economic data and an increase in domestic interest rates.
   
• Reassuring headlines, weaker details – The headlines from the June labour report were stronger than expected. A headline increase in payrolls of 147,000 over the month, coupled with net upward revisions of 16,000 to the past two months of data***, help provide some reassurance that firms continue to hire amidst elevated trade-policy uncertainty. At the same time, the headline unemployment rate fell to 4.1%***, in contrast to expectations for a rise to 4.3%*. However, there were a couple of softer spots in the report. First, the decline in unemployment was in part caused by workers leaving the labour force, with the participation rate falling again in June. Second, job growth in June was flattered by a large gain in public-sector jobs, with private hiring weaker at 74,000***. Still, these data are not consistent with any abrupt slowdown in the economy, and they help support the Fed's patient approach to cutting interest rates. In our view, a rate cut in July looks unlikely, with the Fed much more likely to start easing again in September, data permitting. 
   
• Congress set to pass its giant tax and spending bill – The House of Representatives is fast approaching a final vote on the signature One Big Beautiful Bill Act (OBBBA) legislation. Once passed this will head to the president's desk to be signed into law before Republicans' self-imposed July 4 deadline. OBBBA will deliver a very large package of tax and spending measures, which in aggregate will cost around $3.3 trillion over the next decade, excluding interest costs, according to the Congressional Budget Office estimates. In practice, the legislation will extend the expiring personal tax-cut provisions that were passed during the first Trump administration in 2017, while also adding additional tax reductions for households and businesses. These giveaways will only partly be paid for by lower government spending and changes to green energy tax credits. In our view, the legislation will add a small tailwind to growth in 2026, albeit at the cost of a worse longer-term debt outlook for the U.S. federal government.

James McCan
Investment Strategy

^{*FactSet
**Bloomberg
***Bureau for Labor Statistics}