Daily market snapshot

Monday, 2/23/2026 p.m.

• Stocks fall on U.S. tariff hike and AI disruption concerns – North American equity markets were broadly lower Monday, following an announcement from U.S. President Donald Trump that he would raise the global tariff rate implemented under Section 122 of the Trade Act to 15%.* Additionally, AI‑related disruption concerns contributed to market losses, with growth‑oriented sectors of the S&P 500 such as technology among the laggards.* Within technology, the software industry declined 4%, as investors have grown concerned that advances in AI could erode market share for existing software companies.* Private investment managers were sharply lower as well, as these firms are perceived as having private‑credit exposure to software companies.* Blackstone and KKR each fell more than 5%, and the S&P 500 financials sector overall was down more than 3% today.* Contrarily, defensive sectors such as consumer staples and health care outperformed, each gaining over 1%.* In Canada, the TSX fared better, posting only a modest decline and was supported by strength in the materials sector.* Bond yields closed lower, with the 10‑year U.S. Treasury yield at 4.03% and the 10‑year GoC yield at 3.19%.* In commodity markets, precious metals ended higher amid heightened policy and market volatility, with gold prices rising more than 3%.*
   
• Global tariff rate raised to 15% - On February 20, U.S. President Donald Trump announced a 10% global tariff under Section 122 of the Trade Act, following the Supreme Court’s decision ruling against tariffs implemented under the International Emergency Economic Powers Act (IEEPA). Over the weekend, President Trump stated he would raise the 10% tariff rate to 15%.* Tariffs imposed under Section 122 can remain in effect for up to 150 days, and we expect the administration to pursue investigations that could allow tariffs under Section 301 or Section 232 once the Section 122 tariffs expire. With CUSMA-compliant goods exempt from tariffs, we don't believe the newly announced 15% global tariff rate will have a meaningful impact on the Canadian economy. For Canada, the more impactful tariffs are the Section 232 tariffs on steel, aluminum and lumber, which remain intact. According to the Yale Budget Lab, prior to the Supreme Court ruling against IEEPA tariffs, the U.S. average effective tariff rate stood at 16%. Under the new 15% global tariff, the effective tariff rate is expected to fall modestly to 13.7%.** In our view, the newly announced 15% tariff rate is unlikely to have a meaningful impact on economic activity, and we expect tariff rates to remain elevated compared to history, even after the Section 122 tariffs expire as the administration pursues other avenues to implement tariffs. However, it does add to policy uncertainty. In this backdrop, we advise investors not to overreact to headlines, and we reiterate our constructive outlook for global equity markets, supported by strong corporate profit growth and healthy economic activity.
   
• Earnings in focus – Corporate earnings will be in focus this week, with more than 50 S&P 500 companies and 30 TSX Composite companies set to report. All eyes will likely be on NVIDIA’s results on Wednesday, as investors look for the latest update on AI spending trends. Additionally, we'll get a read on earnings trends within domestic banks, with each of the big six banks scheduled to report.* South of the border, with 85% of S&P 500 companies having reported so far, results have been strong. S&P 500 earnings per share are on pace to grow 12.7% in the fourth quarter, above expectations for roughly 7% growth entering the year.* The technology sector has been a primary driver of the strong fourth-quarter results, with the sector’s earnings on track to grow by more than 25% year-over-year—the highest among any sector in the S&P 500.* Despite robust earnings growth, the technology sector has lagged in 2026, down roughly 4% year-to-date, as concerns about AI disruption have weighed on the group, particularly software companies.* In Canada, roughly half of the TSX has reported thus far, with earnings on track to grow by 16.5% in the fourth quarter, led by the materials sector.* We believe a balance between growth- and value-style sectors will be key to investor success in 2026. As part of our Canadian opportunistic equity sector guidance, we recommend overweight positions in industrials, materials and energy, offset with underweights to communication services, consumer discretionary, consumer staples and technology. For our U.S. equity sector guidance, we recommend overweight positions to industrials, health care and consumer discretionary, offset with underweights in consumer staples and utilities.

Brock Weimer, CFA;
Investment Strategy

^{Source: *FactSet ** Yale Budget Lab}

• Stocks reverse early losses as Supreme Court strikes down Trump's global tariffs – Equities finished higher while bond prices declined following the Court’s 6–3 ruling that the U.S. president exceeded his authority by using a federal emergency‑powers statute to impose the tariffs*. The decision leaves unresolved whether previously collected duties—potentially up to $170 billion—must be refunded, sending that question back to a lower court and likely beginning a lengthy legal process*. The U.S. administration responded immediately, signaling its intent to achieve similar policy outcomes through alternative avenues. U.S. President Trump announced a new five‑month, 10% global tariff under Section 122 of the Trade Act, while the administration prepares to pursue investigations that could enable tariffs under Section 301 or Section 232. Retail and technology stocks outperformed, and government bond yields moved modestly higher amid concerns that potential refunds could widen federal budget deficits*. In our view, the ruling could act as an additional form of short‑term fiscal stimulus, complementing ongoing tax refunds and supporting near‑term growth. However, we continue to expect that overall tariff rates will remain elevated as the administration leverages other legal pathways. We advise investors not to overreact to the headlines and continue to maintain our constructive outlook, grounded in steady economic growth and rising corporate earnings.
• Geopolitics also an area of focus - Rising geopolitical tensions are also getting some attention after reports that the U.S. administration may consider a limited military strike on Iran to secure more substantive concessions on its nuclear program*. President Trump indicated that Iran had “10 to 15 days at most” to reach a deal. WTI crude is slightly lower today at $66 per barrel, though prices recently touched their highest level since August and remain on track for a 5% weekly gain*. While firmer oil prices could present upside risks to inflation, we note that they remain near the low end of their five‑year range. According to the U.S. Energy Information Administration (EIA), the global oil market is currently experiencing a significant oversupply, a dynamic the agency expects to persist through 2026. Finally, while geopolitical flare‑ups can create short‑term volatility, recent episodes have produced only limited and short‑lived market impacts*. That remains our base case today.
• U.S. economic data highlight Fed challenge - Today's batch of economic data, though old news at this point, provides mixed takeaways and highlights why some Fed officials are in no rush to rates. The U.S. growth slowed more than expected in the fourth quarter, with GDP increasing at an annualized 1.4% pace vs. the 2.8% consensus estimate*. Government spending was a notable drag due to the longest government shutdown in history, which though should reverse in the current quarter. For 2025, U.S. GDP still posted a solid 2.2% increase, and expectations point to a modest acceleration this year supported by tax refunds and strong business investment, including heavy AI-related spending*. Despite the dovish read from the weaker end to 2025 for the U.S. economy, lingering inflation pressures are likely to keep the Fed on the sidelines for a while longer. The Fed's preferred measure of inflation, the core personal consumption expenditures price index, rose 0.4% in December, the most in nearly a year, rising 3% from a year ago*. We are still looking for two rate cuts this year, but they will likely be back-end loaded.
• Tech sentiment stabilizes ahead of Nvidia's earnings - The holiday-shortened week is ending with a rebound in mega-cap technology stocks and a pause in the rotation and broadening theme that has defined market performance this year*. Within tech, the software subsector has undergone one of its most significant drawdowns in recent history, with its weighting in the S&P 500 falling sharply from about 12% to just over 8%*. Selling has been broad and indiscriminate, and in some cases, valuations may already reflect a substantial degree of AI disruption risk relative to current fundamentals. While pessimism may now be overstated, the prospect of the tech sector regaining sustainable leadership remains in question, particularly as the macro backdrop continues to favor a pro cyclical tilt in portfolios, in our view. All eyes will be on Nvidia's earnings on February 25 as the company's result and guidance will likely be an important catalyst for tech performance and AI sentiment*. We recommend equal weight positioning in tech and see opportunities in the industrials, consumer discretionary, and health care sectors.

Angelo Kourkafas, CFA
Investment Strategy

^{Source: *Bloomberg}

• Markets close mixed as investors weigh Walmart's outlook – The TSX closed higher, while U.S. equity markets pulled back on Thursday after Walmart reported fourth-quarter 2025 results before the open, offering a read on consumer health. Earnings and revenue narrowly exceeded forecasts, though guidance for 2026 came in below expectations*. Bond yields were also mixed, with the 10-year Government of Canada yield up to 3.23% and the 10-year U.S. Treasury yield down at 4.07%*. In international markets, Asia finished mostly higher overnight, as several markets reopened after the Lunar New Year holiday, while China's markets remain closed*. The U.S. dollar advanced versus major currencies*. In commodities, WTI oil traded higher amid supply concerns as U.S.-Iran tensions rise and talks stall*.
   
• Walmart results beat; outlook misses – Retail giant Walmart reported results that narrowly topped analyst estimates on both earnings and revenue this morning*. In our view, Walmart's revenue exceeding forecasts provides another data point that consumers remain resilient, despite weak sentiment*. More broadly, earnings have exceeded expectations as well: with more than 80% of S&P companies reporting, 75% have beaten estimates, with an average upside surprise of 7.2%*. Consequently, earnings growth estimates have been revised up to 12.4%, from 7.2% at quarter-end*. Earnings growth is expected to be broad-based as well, with 10 of the 11 sectors forecast to post higher earnings, led by technology and industrial companies*. We expect robust, expansive earnings growth to support a broadening of market leadership. Profit growth is expected to accelerate through 2026, with estimates calling for a roughly 14% rise in earnings*. With valuations elevated relative to history*, we believe continued earnings growth will be a key element for further stock‑market upside. We maintain a favourable view on equities and recommend overweighting stocks relative to bonds within a globally diversified allocation. We see opportunities in U.S. large-cap stocks, developed overseas small- and mid-cap stocks, and emerging-market equities.
   
• Jobless claims lower than expected – U.S. initial jobless claims declined to 206,000 this past week, below the 225,000 consensus estimate*. On a trend basis, weekly jobless claims are averaging about 213,000 year-to-date, below last year's average of 226,000*. Continuing claims — reflecting the total number of people receiving benefits — edged up to 1.87 million, roughly in line with forecasts*. Job openings contracted to 6.5 million in December, compared with unemployment of 7.4 million*. With the unemployment rate still low at 4.3%, we view these data as consistent with recent trends reflecting a stabilizing labour market characterized by slower hiring and layoffs. We expect these labour-market conditions to persist in the near term, helping support gradual inflation moderation.

Brian Therien, CFA;
Investment Strategy

^{Source: *FactSet}

• Stocks close higher following solid U.S. manufacturing and housing-market data – North American equity markets finished higher on Wednesday amid a busy U.S. economic calendar. Durable goods orders and industrial production were both better than expected, pointing to momentum in U.S. manufacturing.* Additionally, housing starts for the final two months of 2025 were higher than expected, with single‑family starts rising to a 10‑month high.* From a leadership perspective, consumer discretionary and energy were among the top performers of the S&P 500— with the latter supported by a spike in oil prices—while interest‑rate‑sensitive sectors such as utilities and real estate lagged.* U.S. bond yields closed higher following the strong economic data, with the 10‑year U.S. Treasury yield at 4.09% while the 10‑year GoC yield was little changed at 3.22%.* In commodity markets, oil prices were up roughly 5% as investors react to reports that U.S.–Iran talks have stalled.*
   
• Market implications of a falling U.S. dollar – Despite stabilizing more recently, the U.S. dollar faced renewed pressure in 2026, extending the weakness that defined most of 2025.* In our view, fears about the dollar’s demise are overstated, as the currency has largely returned to the pre‑pandemic range in which it traded for most of 2015–2019, and we expect it to retain its role as the global reserve currency.* Nonetheless, the multiyear uptrend has been broken and currency volatility has risen. Historically, a weaker U.S. dollar has coincided with strong equity returns in both North American and overseas markets. The MSCI Emerging Markets Index has posted a median quarterly gain of 4.4% in quarters when the dollar has fallen versus a median quarterly gain of 0.4% when the dollar rises.** The MSCI EAFE Index has posted a median quarterly gain of 4.8% during periods of dollar weakness versus a 0.4% gain when the dollar rises.** The TSX has gained 4.5% during quarters with dollar weakness versus 2.6% in quarters with a rising dollar.** Additionally, U.S. large‑ and mid‑cap stocks have posted median quarterly gains of over 5% during periods of dollar weakness versus gains of less than 3% in quarters of dollar strength.** For investors, we think maintaining a globally diversified portfolio remains prudent, as a weaker dollar environment could support ongoing strength in overseas stocks. As part of our opportunistic asset allocation, we recommend overweighting U.S. stocks, overseas developed small‑ and mid‑cap stocks, and emerging‑market stocks.
   
• Durable goods orders point to underlying improvement in U.S. manufacturing activity – U.S. headline durable goods orders fell 1.4% in December, slightly better than consensus expectations for a 1.5% drop.* The decline in the headline index was driven by a 25% drop in the volatile commercial aircraft category.* Core durable goods orders (excluding transportation) rose 0.9% in December, above expectations for a 0.3% gain.* New orders for computers and related products increased 3% in December and are up nearly 14% year over year, suggesting AI‑related spending remains strong.* Additionally, this morning’s January industrial production reading showed a 0.7% monthly increase, above expectations for a 0.4% gain.* In our view, taken together with the recent improvement in the ISM Manufacturing PMI, these data point to stabilization in the U.S. manufacturing sector after a multiyear period of weakness.

Brock Weimer, CFA;
Investment Strategy

^{Source: *FactSet **FactSet, total return in local currency. Median quarterly returns 1991 – 2025. Dollar measured by ICE U.S. Dollar Index.} 

• Stocks finish mixed – North American equity markets were mixed on Tuesday, following the domestic January consumer price index (CPI) report that showed inflation continues to moderate.* The TSX posted a modest decline, weighed down by weakness in the materials and energy sectors, while U.S. markets edged out a slight gain.* In the U.S., sector leadership was narrowly led with financials and real estate the top performers, each gaining roughly 1%.* The technology and industrials sectors also posted modest gains, while all other sectors of the S&P 500 closed lower.* Canadian bond yields traded lower following the inflation report, with the 10-year GoC yield falling to 3.22% while U.S. bond yields closed little changed.* In commodity markets, oil prices closed down nearly 1%, while precious metals prices were lower as well, with gold off by nearly 3%.*
   
• Inflation continues to trend lower – Domestic inflation continued to ease in January, with headline CPI rising 2.3% annually, down from a 2.4% increase in December.* A 16.7% year‑over‑year decline in gasoline prices was a primary contributor to the moderation in headline inflation, while CPI excluding gasoline posted a 3% annual gain in January.** Shelter inflation also continued to cool, supported by slowing rent growth and lower mortgage interest costs, increasing just 1.7% year‑over‑year—the lowest pace since February 2021.** Encouragingly, the Bank of Canada’s (BoC) preferred inflation measures—CPI‑median and CPI‑trim—continued to moderate as well, with year‑over‑year increases of 2.5% and 2.4%, respectively.* The 2.4% gain in CPI‑trim marks the lowest reading since April 2021.* With core inflation within the BoC’s 1%–3% target range and showing signs of continued moderation, we expect the Bank to hold its policy rate steady in the near term.
   
• Overseas equity momentum continues in 2026 – Overseas equities have sustained their strong momentum from 2025, delivering additional gains so far in 2026. The MSCI EAFE Index, which measures the performance of developed international markets, has risen nearly 7% year‑to‑date, supported in large part by strength in Japan, where stocks are higher by nearly 13% in Canadian dollar terms.* Emerging‑market equities have also produced solid results in 2026. While U.S. technology stocks have paused after strong prior performance, the same cannot be said for emerging‑market technology. The MSCI Emerging Markets Index has gained 10% year‑to‑date in Canadian dollar terms, driven by technology‑heavy regions such as Korea, where stocks are up 34% in 2026.* In our view, global diversification will remain a key investment theme throughout 2026. Combined with our expectation for a healthy global economic backdrop, we recommend that investors take a diversified approach to overweighting equities relative to bonds. Specifically, we see attractive opportunities in U.S. stocks, overseas developed small‑ and mid‑cap stocks, and emerging‑market equities.

Brock Weimer, CFA;
Investment Strategy

^{Source: *FactSet **Statistics Canada}