Daily market snapshot

• Stocks rally as European Union tariffs are delayed – North American equity markets closed higher on Tuesday, following an announcement over the weekend that the previously proposed 50% tariff on imports from the European Union by the U.S. will be delayed until July 9 instead of June 1.* The TSX posted a gain of 0.8% while the S&P 500 finished higher by 2%.* From a leadership perspective, most sectors of the S&P 500 finished the day higher, led by growth-style sectors, such as technology and consumer discretionary.* Overseas, European stocks traded higher following the positive trade developments and an improvement in German consumer confidence, while Asian markets were mostly higher overnight.* On the corporate front, Bank of Nova Scotia reported earnings that were slightly below analyst expectations, driven by higher-than-expected credit costs, while sales modestly exceeded analyst expectations.* South of the border, U.S. consumer confidence rose for the first time in five months in May, with The Conference Board's Consumer Confidence Index rising to 98 versus expectations for a reading of 88.* Bond yields closed lower, with the 10-year GoC yield declining to around 3.25% and the 10-year U.S. Treasury yield falling to around the 4.45% mark.*
   
• European Union tariffs pushed back to July 9 – After threatening to implement a 50% tariff on goods imported from the European Union (EU) on June 1, U.S. President Donald Trump announced over the weekend that the U.S. will extend the EU tariff deadline to July 9 to allow more time for negotiations.* Following the initial announcement on Friday, U.S. equity markets sold off, with the S&P 500 closing lower by 0.7% and the Nasdaq shedding 1%, highlighting that trade policy remains in the driver's seat for markets.* Over the weekend, U.S. President Trump cited constructive talks with EU Commission president Ursula von der Leyen as the reason for extending the tariff deadline, providing a boost to equity markets on Tuesday and helping recoup Friday's losses.* While we believe peak trade-policy uncertainty is likely behind us, markets could still experience bouts of volatility over the coming weeks as we approach the expiration of the 90-day pause for the April 2 tariff announcement in early July and trade negotiations ramp up. We believe investors will be best served by maintaining a well-diversified portfolio aligned to their goals as opposed to reacting to headlines.
   
• Earnings season winds down with all eyes on NVIDIA – First-quarter earnings season is winding down, with roughly 96% of companies in the S&P 500 and 93% of companies in the TSX having announced results.* This week, all eyes will be on U.S. tech-giant NVIDIA, which will report after the market close tomorrow, and several large Canadian banks, which will report this week. At an index level, takeaways have been positive, with S&P 500 earnings per share on pace to grow by 13.4% in the first quarter and with 78% of companies reporting earnings that exceeded analyst expectations, above the 10-year average of 75%.* In Canada, TSX earnings per share are on pace to grow by 12% in the first quarter, with 56% of companies reporting better-than-expected earnings.* While earnings estimates have been revised lower in the quarters ahead, the S&P 500 is still expected to post full-year earnings growth of 9% in 2025, while the TSX is expected to see earnings growth of 8%.* In our view, single-digit earnings growth is achievable this year, given that economic data has been resilient and trade tensions have eased from peak levels. Moderate but positive earnings growth in 2025 should be supportive of equity markets, in our view.
   

Brock Weimer, CFA
Investment Strategy

^{Source: *FactSet} 

• Stocks close lower on new tariff concerns – Equity markets closed lower on Friday following new statements from President Trump calling for tariff hikes on the European Union and import taxes on Apple iPhones.* These developments appear to be serving as reminders to markets that, while trade tensions have eased, tariff risks remain. Canada retail sales rose 0.8% in March, beating estimates for a 0.7% increase.* Sales were higher in six of nine subsectors, led by a 4.8% increase for motor vehicle and parts dealers.** Bond yields fell, with the 10-year Treasury yield at 4.51%, extending yesterday's reversal of their recent trend higher, as the potential for higher budget deficits driven by tax cuts has raised concerns in bond markets. In international markets, Asia finished higher as China announced new easing measures, including adding liquidity and cutting bank deposit rates.* Europe traded lower on the new statement from President Trump calling for 50% tariffs on the region.* The U.S. dollar declined against major international currencies. In commodity markets, WTI oil was down on expectations of another supply hike from OPEC+ in July.*
   
• President Trump calls for new tariff hikes – President Trump issued a new statement this morning calling for 50% tariffs on the European Union starting June 1, 2025, citing unfair trade barriers and lack of progress in negotiations.* The timing, if implemented, would conflict with the 90-day pause in tariffs that set a 20% duty on imports from the region, which is scheduled to expire on July 9. In a separate post on Trump's social media platform, Truth Social, the president warned of a new 25% import tax on iPhones that are not made in the U.S. Apple had been planning to shift production of iPhone sold in the U.S. to India from China.* These announcements appear to be serving as reminders to markets that, while trade tensions have eased, tariff risks remain. While some additional volatility relating to particular regions and companies may continue, the broader trend of trade tensions appears to be easing, in our view.
   
• Strong earnings season winds down – With 96% of the S&P 500 companies having reported quarterly results, performance has been strong relative to expectations. 78% have beaten analyst estimates, with an average upside surprise of 8.4%.* Forecasts for first-quarter earnings growth of S&P 500 companies have been revised higher to 13.3%, from 6.7% at the end of the quarter.* The health care sector has delivered the strongest earnings growth, up 43% year-over-year, followed by communications stocks at 29%.* Performance has also been broad, with eight of the 11 sectors reporting higher earnings year-over-year*. Wider earnings growth should drive more balanced market performance across sectors, strengthening the case for portfolio diversification, in our view. Earnings growth is forecast to drift lower over the quarters ahead, combining for 9.0% growth for 2025.* While we believe this figure could be revised lower as tariffs likely weigh on corporate profit margins, earnings should be sufficient to support stock prices over time, in our view.
   

Brian Therien, CFA
Investment Strategy

^{Source: *FactSet} 

Thursday, 05/22/2025 p.m.

• Stocks mixed as U.S. tax and spending bill advances – The TSX edged higher while U.S. equity markets closed lower on Thursday following passage of the tax and spending bill in the U.S. House of Representatives.* Consumer discretionary and communication stocks posted the largest gains, while the utility and health care sectors were laggards. Bond yields fell, with the 10-year Government of Canada yield at 3.36% and the 10-year U.S. Treasury yield at 4.54%, in a reversal of their recent trend higher, as the potential for higher budget deficits driven by tax cuts has raised concerns in bond markets. Initial jobless claims fell to 227,000 this past week, below estimates pointing to 230,000*. Continued claims, which measures the number of people receiving benefits, ticked up to 1.9 million, from 1.87 million the prior week*. In international markets, Europe finished lower, as the preliminary S&P Services Purchasing Managers' Index (PMI) for the eurozone dropped to 48.9 in May, slipping into contraction territory and missing estimates for a modest rise to 50.3.* The U.S. dollar advanced against major international currencies. In commodity markets, WTI oil traded lower on potential additional supply hikes from OPEC+*.
   
• U.S. House passes tax and spending bill – The U.S. House of Representatives passed the tax cut and spending bill this morning in a 215-214 vote largely along party lines. The vote follows committee sessions this week to make changes and amendments to address objections and shore up support among Republicans. The bill would permanently extend provisions of the 2017 Tax Cuts and Jobs Act that were set to expire at the end of this year and temporarily raise the deduction for state and local taxes — known as "SALT" — to $40,000 for households with income of up to $500,000 per year and eliminate income taxes on Social Security, overtime pay and tips. To partially offset lower revenue driven by tax cuts, spending cuts will include reductions to renewable-energy incentives, tightened eligibility for health and food aid programs, and Medicaid work requirements, among others. Overall, the Congressional Budget Office forecasts that the bill would add roughly $2.4 trillion to the budget deficit over the next decade, though this figure excludes interest on the additional debt and some interactions of provisions, potentially pushing the impact closer to $3 trillion, which has raised concerns in bond markets. The bill will now advance to the Senate, where it appears likely to face additional revisions. Congress has set a July target for a final bill to be signed into law, which could look very different than the current version. Consequently, we do not recommend taking actions based on the bill in its current form.
   
• Preliminary services and manufacturing indexes rise: The S&P Flash U.S. Services PMI rose to 52.3 for May, beating estimates for 51.5*, as higher prices more than offset the continued drop in exports. Flash manufacturing PMI also increased to 52.3, ahead of forecasts pointing to 50.7*, benefiting from the largest increase in input inventory holdings on record** as companies sought to get ahead of further tariff-related issues, such as potential shortages and price hikes. Overall, these readings are consistent with recent trends of services remaining above the key 50.0 mark reflecting expansion and manufacturing recovering from contraction at the start of the year. Continued, though likely slower, economic growth would be supportive of the healthy labour market and consumer spending, in our view.
   

Brian Therien, CFA
Investment Strategy

^{Source: *FactSet **S&P}

• Stocks close lower as bond yields jump – North American equity markets traded lower on Wednesday, as a spike in bond yields weighed on sentiment. A 20-year U.S. Treasury auction was met with weaker demand than expected, adding to the recent move higher in bond yields. The 10-year U.S. Treasury yield climbed roughly 0.1 percentage points to just below the 4.6% mark, while the 30-year Treasury yield rose to 5.08%.* The 10-year GoC yield finished higher as well, rising to 3.38%.* In equity markets, the S&P 500 closed lower by roughly 1.6%, while the TSX posted a decline of 0.7%.* On the policy front, reports have surfaced that the U.S. House of Representatives is making progress on the reconciliation bill, and a vote could come as soon as later today.* Overseas, markets in Europe were flat following a higher-than-expected inflation reading from the U.K., while markets in Asia were mixed overnight.* 
   
• Earnings remain in focus – First-quarter earnings season is winding down, with roughly 94% of companies in the S&P 500 and 91% of companies in the TSX having reported earnings.* Retailers Target, Lowe's and TJX all reported earnings this morning, posting mixed results. Target reported earnings per share and sales that were lower than expected, citing economic uncertainty as part of the reason behind the lackluster results.* Additionally, Target lowered its full-year guidance for earnings and sales growth.* Lowe's and TJX posted stronger results, with both companies slightly exceeding expectations for earnings.* Both Lowe's and TJX maintained full-year guidance.* Today's batch of retail earnings follows Home Depot's results yesterday, where the company reported sales that were better than expected but earnings that were slightly below expectations.* Home Depot management stated it does not plan to raise prices due to tariffs and maintained its full-year guidance. Next up, Canadian bank earnings will be in focus tomorrow, with TD Bank scheduled to report, while U.S. tech earnings will take the spotlight next week, with NVIDIA scheduled to report on May 28.* At an index level, first-quarter results have been strong thus far, with S&P 500 earnings on pace to grow by roughly 13%, up from estimates of roughly 7% at the end of March.* TSX earnings have been strong as well, with earnings on pace to grow by 12% in the first quarter.* While earnings estimates have been revised lower in the quarters ahead, S&P 500 earnings are still expected to post growth of 9% in 2025, while the TSX is expected to see earnings growth of 8%.* With trade tensions easing in recent weeks and healthy economic activity, we believe single-digit earnings growth for the S&P 500 is attainable in 2025.*
   
• Longer-term bond yields rise – Bond yields closed higher again on Wednesday, with the 10-year U.S. Treasury yield just below the 4.6% mark and the 10-year GoC yield at around 3.38%.* After the 10-year GoC yield fell to below 2.9% and the 10-year U.S. Treasury yield fell to roughly 4% in early April, yields have climbed higher over the past month and a half, as trade tensions have eased and economic data has been resilient.* Additionally, yesterday's domestic inflation report showed that measures of core inflation ticked higher in April, sending the 10-year GoC yield higher by 0.12 percentage points yesterday.* Despite the recent rise in bond yields, Canadian investment-grade bonds are roughly flat year-to-date, while U.S. investment-grade bonds were higher by roughly 2% through yesterday's close.* Within Canadian investment-grade bonds, we recommend investors slightly overweight intermediate- and longer-term bonds relative to the Bloomberg Canada Aggregate Index. In our view, intermediate- and longer-term bonds can allow investors to lock in higher yields for longer, as the Bank of Canada likely continues to ease monetary policy, highlighting potential reinvestment risk of short-term bonds and GICs.
   

Brock Weimer, CFA
Investment Strategy

^{Source: *FactSet}

• Stocks finish mixed following Canadian inflation – The TSX closed modestly higher, while U.S. equity markets closed modestly lower on Tuesday, following Canadian consumer price index (CPI) data. Headline CPI rose by 1.7% annually in April, down from the March reading of 2.3% and the lowest annual gain since September 2024.* On the corporate front, home-improvement retailer Home Depot announced better-than-expected sales for the first quarter but reported earnings that were slightly lower than expected.* However, company management maintained full-year guidance and stated that the company doesn't plan to raise prices in response to tariffs.* Overseas, European markets closed higher following a modest improvement in the eurozone consumer confidence indicator, while Asian markets were mostly higher overnight following China's decision to lower two of its key lending rates by 0.1%.* Bond yields finished higher, with the 10-year GoC yield rising to 3.29% while the 10-year U.S. Treasury yield closed around the 4.5% mark.*
   
• Headline inflation falls to below 2% – Headline CPI rose by 1.7% year-over-year in April, down from a 2.3% rise in March and the lowest annual gain since September of last year.* The decline in headline inflation was driven by lower energy prices, which declined by 12.7% in April following the removal of the consumer carbon tax.** Excluding the impact of lower energy prices, price pressures were more persistent. CPI excluding food and energy rose by 2.6% on an annual basis in April, up from a 2.4% rise in March.* CPI-median and CPI-trim, which are measures of core inflation closely monitored by the Bank of Canada (BoC), told a similar story, with CPI-median posting an annual gain of 3.2% and CPI-trim posting an annual gain of 3.1% in April, both higher than the March readings.** Despite potentially persistent core inflation, we believe the BoC will continue easing policy in 2025 to help offset potentially slowing economic growth. Bond markets are pricing in one more 0.25% rate cut from the BoC in 2025, which we'd view as a reasonable expectation.***
   
• Earnings season winds down, with retailers in focus this week – First-quarter earnings season is winding down, with roughly 93% of companies in the S&P 500 and 92% of companies in the TSX having reported earnings.* This week, consumer spending trends are in focus, with retailers Home Depot, Target, Lowe's, TJX and Ross Stores all scheduled to report, and with investors likely watching to see how company management expects tariffs will impact retail pricing and consumer demand. Home Depot announced results this morning, reporting sales that were better than expected but earnings that were slightly below expectations.* Company management stated it does not plan to raise prices due to tariffs and maintained its full-year guidance.* Next up will be Target, TJX and Lowe's, which will report tomorrow. At an index level, results have been strong thus far, with S&P 500 earnings growth on pace to grow by roughly 13%, up from estimates of roughly 7% at the end of March.* Earnings in the TSX have been strong in the first quarter as well, and are on pace to grow by 12%.* While earnings estimates have been revised lower in the quarters ahead, S&P 500 earnings are still expected to post growth of 9% in 2025, while the TSX is expected to post earnings growth of 8%.* With trade tensions easing in recent weeks and healthy economic activity, we believe single-digit earnings growth is attainable in 2025.*
   

Brock Weimer, CFA
Investment Strategy

^{Source: *FactSet **Statistics Canada ***Bloomberg}