Friday, 10/9/2026 p.m.

• Markets rebound towards record highs – Equity markets closed the week on a positive note with a broad rally in stocks helping overcome some lingering weakness among U.S. chipmakers. The S&P 500 was up 0.6% over the day while Canadian S&P/TSX index jumped an impressive 1.5%, mirroring a positive tone in global equity markets. Canadian government bonds rallied today, with the 10-year yield down 6 basis points (0.06%), helped by a weak employment report. However, U.S. government paper sold off, pushing yields on U.S. Treasuries 2 basis points higher (0.02%). The U.S. dollar continues to move higher against a trade-weighted basket of currencies, capping a fourth consecutive week of gains in the Greenback.
   
• Bond market bumps continue – We continue to see big swings in bond markets, driven by oil prices, robust growth, sticky inflation, hawkish central banks and high levels of government debt. The U.S. benchmark 10-year yield peaked at a multidecade high of 5.31% earlier this week, while the Canadian 10-year yield hit 4%, before moving down to 3.87% at the end of the week. Rising long-term market interest rates have tightened domestic financial conditions which will weigh on growth, although this adjustment has been muted somewhat by strong corporate fundamentals, with equities remaining close to all-time highs and the spread between corporate and government borrowing rates still narrow. Outside North America, the big action has been in European bond markets, with yields on French bonds rising sharply in recent weeks as investors worry about local debt sustainability in the face of high government debt, larger deficits and sluggish growth. Investors will hope to see signs of a stabilization in global interest rates, with further increases in yields a clear risk to impressively resilient equity markets.
   
• Labor data adds to Bank of Canada conundrum – A sharp drop in employment over August, on-top of the decline reported in July, paints the labor market in a much weaker light. This constitutes a loss of 110,000 jobs over the past two months, undermining the encouraging pickup in hiring we had seen earlier in the year. Canadian labor market data have been volatile over recent years, making it harder to interpret these figures. However, the latest numbers will add to concerns that the latest escalation in trade tensions with the U.S. is presenting a renewed drag on business sentiment and hiring. The Bank of Canada will have to balance these concerns with a further rise in inflation pressures as energy prices increase. Investors will have to wait until later in October for the next Canadian inflation report, but will see a foreshadowing of these trends in the U.S. CPI report released next week. Otherwise on the near-term agenda will be the start of the Q3 earnings season, with a range of large U.S. banks first in line to report. Robust earnings growth has helped drive equity returns this year and should continue to support market performance going forward in our view.

James McCann;
Investment Strategy

^{Source for all data: Bloomberg}