Daily market snapshot

Monday, 07/28/2025 p.m.

• Stocks finish mixed after U.S.-EU deal – Equity markets hovered near the flatline, with the TSX closing slightly lower, while the Nasdaq notched its 17th record high of the year*. Over the weekend the U.S. and EU reached a trade agreement, setting a 15% tariff on most EU imports, a development that provides investors a sigh of relief ahead of the August 1 trade deadline. With reports out last Friday that an agreement was in the works, stock prices likely already reflect the positive news. The most notable moves were in the currency space, as the U.S. dollar climbed the most since May, with notable strength against the euro*. The U.S. dollar had tumbled earlier this year, but reduced trade uncertainty appears to be helping the currency stabilize. Government bond yields rose modestly ahead of the BoC and Fed meetings this week, while oil prices climbed, as the U.S. administration shortened the deadline for Russia to end its war in Ukraine or face sanctions.
   
• Trade agreements help reduce uncertainty – Tariffs and trade have been the biggest source of uncertainty this year, triggering a near-20% decline in stocks in April*. But this fog is gradually clearing as more trade deals are announced ahead of the U.S. government's August 1 deadline. The weekend agreement with Europe reduced threatened tariffs from 30% to 15% and included commitments to purchase $750 billion in U.S. energy and invest an additional $600 billion in the U.S. The lowered tariff rate will apply to cars, but steel and aluminum will continue to face 50% tariffs, while pharmaceutical and semiconductor tariff decisions remain pending. The reality is that tariffs will move higher for goods coming from the EU after next week, but the agreement helps avoid a trade war and helps provide clarity for corporations. Next, the U.S. and China are reportedly set to extend their tariff truce by another 90 days when delegations from the two countries meet today in Sweden. For Canada, reports suggest that the August 1 deadline may be missed, as the government is trying to secure the best possible deal. In this case, tariffs are due to rise to 35%, but that would only apply to non-USMCA compliant goods, which are estimated to be around 20% of Canada exports to the U.S. In the meantime, the government is pledging support to sectors that are harder hit, like steel producers and auto manufacturers*.
• Busy week ahead – Despite the broadly positive sentiment, market moves are muted this morning ahead of a busy week of earnings and economic releases. Almost 40% of the S&P 500 companies are reporting results, including many among the Magnificent 7 (Microsoft, Meta, Apple, Amazon)*. So far, the earnings season has been solid, in our view, with banks highlighting stable consumer and credit trends and technology companies continuing their heavy spending in artificial intelligence. Key economic releases include the second-quarter GDP and the July jobs report, which comes after the Fed announces its policy-rate decision on Wednesday. Despite political pressures, Chair Powell is expected to continue to argue for patience and data dependence. If clarity on the tariffs improves further after August 1 and inflation data come in no worse than expected, a September cut is possible, with Powell potentially hinting at that at the Fed's annual Jackson Hole meeting on August 21-23. We expect one to two cuts in the second half of 2025, followed by additional easing in 2026, as the Fed moves slowly toward a neutral rate (around 3%-3.5%)*. The BoC is already closer to the end of its easing cycle, as currently policy is in the middle of its neutral range (2.25% - 3.25%), and is likely to pause its rate cuts when it meets this week*. 

Angelo Kourkafas, CFA 
Investment Strategist

^{Source: *FactSet} 

Friday, 07/25/2025 p.m.

• Stocks finish the week higher on solid earnings season, cooling trade tensions – Equity markets closed higher on Friday, as the TSX, S&P 500 and Nasdaq reached new record highs. Earnings season, which has been solid thus far, is set to hit its stride next week, with Magnificent 7 companies Amazon, Apple, Meta Platforms (parent company of Facebook) and Microsoft reporting results next week.* Bond yields fell, with the 10-year Government of Canada yield at 3.49% and 10-year U.S. Treasury yield at 4.38%.* Materials and industrial stocks posted the largest gains, while the energy and communication sectors lagged. In international markets, Asia and Europe closed lower as European Union officials continue negotiations on a trade deal with the U.S.* The U.S. dollar advanced against major international currencies. In commodity markets, WTI oil was down amid reports that limited production in Venezuela by U.S. companies could resume soon.*
   
• Durable goods orders drop less than expected – New orders for U.S. manufactured durable goods fell 9.3% in June from the prior month, ahead of forecasts for an 11.0% decline. Transportation equipment drove the decrease, down 22.4%.** While demand for durable goods fell sharply, the reading follows a 16.5% surge in May that was driven by new aircraft orders. Excluding transportation, new orders rose 0.2%.* Combined with other recent data, we believe these readings point to a gradual recovery in the manufacturing sector, which should help provide broader support for the economy and the labour market.
   
• Earnings season solid thus far – Though still early in the earnings season, with 33% of the S&P 500 companies reporting quarterly results, performance has been solid. Of companies that have reported, 82% have beaten analyst estimates, with an average upside surprise of 6.2%.* Forecasts for second-quarter earnings growth of S&P 500 companies have been revised higher to 5.4%, from 3.8% at the end of the quarter.* Earnings season is set to hit its stride, with Magnificent 7 companies Amazon, Apple, Meta Platforms (parent company of Facebook) and Microsoft reporting results next week. Earnings growth is forecast to rise 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 ** U.S. Census Bureau}
 

Thursday, 07/24/2025 p.m.

• US equities hit new highs – Rallying technology stocks helped pushed the S&P 500 and NASDAQ indexes to new record highs at close of trading today*. Markets reacted positively to signals of strong demand for AI investment in Alphabet's Q2 report, although Tesla's weak results took some of the shine off the tech sector*. Outside mega cap tech stocks, performance was mixed, with the Dow Jones and Russell 2000 small cap indexes both losing ground. The tone in international equity markets overnight was positive, with the Nikkei continuing to lead following the announcement of a US-Japan trade agreement, and European and Korean equities also gaining, helped by reports that similar deals could be in the works for these countries*. Government bond yields were broadly flat over the day, as was the US dollar against a basket of trade weighted currencies*.
   
• Momentum building on trade deals – The US-Japan trade agreement was the sixth announced since "liberation day", and reports suggest that similar deals might be close for the EU and Korea*. Headlines indicate that these would also enforce a 15% tariff rate on imports, below the levels threatened for August 1^st*. Reports also suggest that Korea will commit to investment in the US as part of this agreement, similar to the deal reached with Japan*. If confirmed, these deals would help ease uncertainty over trade policy and avert even more damaging tariff hikes. However, a 15% tariff still delivers a material increase in taxes on trade, and Present Trump signaled that this would represent a floor on US tariff rates, with some partners potentially hit by up to 50% levies**. Vietnam has estimated that its deal, which charges 20% on exports produced predominately in their economy, and 40% that are transshipped from China through Vietnam, would in time cut exports to the US by a third**. 
   
• Tariff pressures to build – US initial unemployment insurance claims were a touch lower last week, providing another signal that tariff uncertainty is not pushing firms to trim their payrolls**. However, those who are unemployed, continue to struggle to find work, with continuing claims edging higher again**. The US economy has clearly slowed this year, with growth tracking at around a 1% annualized pace over the first half***. This moderation is likely to persist into the second half of 2025 in our view, with tariffs likely to squeeze firms' margins, discouraging hiring or investment, or hurt consumer purchasing power if these taxes are passed through to consumers via higher prices. Strong balance sheets should help the economy weather these headwinds without falling into a recession in our view, and there is some hope that activity could bounce back somewhat in 2026 as the impact of tariffs starts to fade, and a modest boost from tax cuts and deregulation kicks in. In Canada, the near-term picture is even more challenging, reflected by this morning's weak retail sales report and recent increases in unemployment**. Certainly, Prime Minister Carney will hope that a trade deal can be reached with the US to limit disruptions from a trade war with its largest trade partner.

Investment Strategy

^{Source: *FactSet **Bloomberg ***Atlanta Fed}
 

Wednesday, 07/23/2025 p.m.

• Stocks rise on announced trade deal with Japan – Equity markets closed higher on Wednesday, with the TSX and S&P 500 reaching record highs*, as trade remained in focus. Under terms of the announced U.S.-Japan trade deal, imports from Japan will reportedly face tariffs of 15%, down from the 25% levy set to go into effect on August 1.* The agreement also includes about $550 billion of investment by Japan in the U.S. Health care and industrial stocks posted the largest gains, while the utility and consumer staples sectors lagged. In international markets, Asia finished higher overnight, led by Japan's Nikkei index, which reached a new all-time high.* The U.S. dollar declined against major international currencies. In commodity markets, WTI oil traded higher following its pullback in recent days.
   
• Earnings season outlook improves on solid results – Corporate earnings season is set to hit full swing, with Magnificent 7 companies Alphabet (parent company of Google) and Tesla reporting second quarter results after market close today.* While still early in the earnings season, 88% of the S&P 500 companies that have reported results have beaten analyst estimates, with an average upside surprise of 6.9%.* As a result, earnings-growth forecasts for S&P 500 companies have been revised higher to 4.7% year-over-year, from 3.8% at the end of the quarter.* Earnings growth is expected to be led by the communications and technology sectors, while energy and consumer discretionary companies are forecast to experience the steepest earnings contraction. Earnings growth is forecast to rise over the quarters ahead, combining for 8.9% 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.
   
• Bond yields rise – Bond yields edged higher, with the 10-year Government of Canada yield at 3.53% and the 10-year U.S. Treasury yield at 4.38%, though the benchmark U.S. yield has generally remained rangebound below its May peak near 4.60%. Bond markets are pricing in expectations for two cuts to the fed funds rate this year and another three cuts next year**, a faster pace than the Federal Reserve's projection of three rate cuts over this timeframe.*** Lower interest rates should reduce borrowing costs for consumers and businesses, which, along with fiscal stimulus and deregulation, should help support a reacceleration of economic growth in 2026, in our view.

Brian Therien, CFA 
Investment Strategy

^{*FactSet **CME FedWatch ***U.S. Federal Reserve}
 

Tuesday, 07/22/2025 p.m.

• Stocks mixed – Megacap tech stocks struggled today, halting a nine day win streak, and pushing the NASDAQ index down 0.4%**. However, the tone in other sectors was brighter, with the S&P 500 index edging higher, helped by broad based gains which helped offset weaker performance from the "Magnificent Seven"*. Meanwhile, the Dow Jones was up 0.4% and the Russell 2000 small cap index was the best performer, rising 1%*. This follows mixed performance in international equities overnight, with Emerging Markets firmer, Japanese equities down and Eurozone indexes struggling*. Meanwhile, government bonds rallied, with the yield on the US 10-year Treasury down 4bps to 4.33%*. We continue to believe that 10-year yields will remain in the 4.0% to 4.5% range, particularly as the Fed remains in wait-and-see mode for now. Otherwise, the dollar was stable against a trade weighted basket of currencies*, and oil prices fell around 0.6%, but remain in their recent $65-70 range**.
   
• Corporate earnings in focus – Markets continue to digest corporate earnings reports, with Tesla and Alphabet results due tomorrow. Thus far we have seen earnings generally beat analyst expectations, which have been marked down heavily in the wake of tariff disruptions over Q2**. General Motors reported stronger than expected earnings per share, albeit down from last year following a $1.1bn hit to profits due to tariffs*. The auto maker warned that the toll from these levies might be higher in Q3*. Markets continue to watch carefully for signs of further progress in trade negotiations, with Treasury Secretary Bessant predicting a "rash" of trade deals between now and the August 1st deadline*. In fact, President Trump announced an agreement with the Philippines today, albeit one which only proposed a marginal reduction in tariff rates to 19% from the 20% recently threatened*. Canada's President, Mark Carney, warned that he would not accept a "bad deal" to avoid the threat of 35% tariffs on non-USMCA compliant goods*.
   
• Fed Chair Powell stuck in the headlines – President trump criticized the Fed again today, arguing that interest rates should be 300bps lower and complaining about the cost of its headquarters renovation*. Treasury Secretary Bessant echoed these concerns, but offered some support to the under-siege Fed Chair, stating that he sees no reason for Jerome Powell to step down from his post as Chair of the Federal Reserve Board*. Of course, the central bank meets to decide on interest rates next week, with the FOMC likely to be split on the direction for policy. There is limited data for the head of the U.S central bank to digest this week. The preliminary PMI surveys for July, released Thursday, top the bill, and it will be interesting to see if the recovery in business sentiment is sustained, or falters amid renewed trade policy uncertainty. Otherwise, housing market data are likely to point to sluggish activity in this interest rate sensitive sector, while the Fed will continue to watch initial unemployment insurance claims data closely for signs of stress in the labour market. While the vote might not be unanimous, the Fed is widely expected to leave rates on hold in July*, although September is shaping up to be a live meeting.

Investment Strategy

^{*Bloomberg **FactSet ***Reuters}