Daily market snapshot

Tuesday, 2/3/2026 p.m.

• Stocks close mixed on tech weakness –S. equity markets closed lower on Tuesday, with weakness in technology weighing on performance.* Software was a particular area of weakness within the technology sector, as concerns continue to grow that advances in AI models could erode market share for existing software companies.* AI spending trends are likely to remain in focus in the days ahead, with Alphabet (Google) reporting tomorrow and Amazon on Thursday.* Canadian stocks outperformed, supported by a jump in commodity prices, with the TSX logging a modest gain for the day.* Overseas, Asian markets closed higher overnight, led by a nearly 4% gain in Japan’s Nikkei, while European markets were little changed.* Canadian bond yields finished slightly higher, with the 10-year GoC yield rising to 3.44% while the 10-year U.S. Treasury yield was little changed at 4.27%.* In Washington, the U.S. House of Representatives voted to pass legislation that will fund five of the six agencies whose funding lapsed over the weekend and extend Department of Homeland Security funding for two weeks to allow negotiations to continue.*
   
• Earnings take the spotlight – Canadian earnings will ramp up in the coming weeks, but U.S. earnings remain the focus this week, with more than 100 S&P 500 companies scheduled to report, led by Alphabet (Google) tomorrow and Amazon on Thursday.* With nearly 40% of the S&P 500 having reported, results have been strong: fourth-quarter S&P 500 earnings are now expected to grow roughly 10%, up from about 7% at the start of the year.* Technology has been a key driver, with the sector on track for nearly 30% earnings growth in the fourth quarter.* Looking to 2026, earnings growth is expected to remain healthy, with forecasts calling for more than 14% growth for the S&P 500 and positive growth in every sector except energy.* In our view, a supportive macroeconomic backdrop should help set the stage for another year of solid profit growth and positive equity-market returns. Yesterday’s ISM Manufacturing PMI rose to its highest level since August 2022, potentially signaling improvement in the U.S. manufacturing sector after the index spent most of the past three years in contraction.* In addition, we expect incremental support for U.S. consumers this year from higher tax refunds related to tax legislation passed in 2025. Against this backdrop, we believe opportunities in equities remain favourable, and we recommend a globally diversified approach to overweighting stocks relative to bonds. We see compelling opportunities in U.S. stocks, overseas small- and mid-cap stocks, and emerging-market equities.
   
• What's in a start? – Despite recent headlines, the S&P 500 gained 1.4% in January and is up about 16% over the past 12 months.* Historically, a positive January has been a bullish signal for full-year returns. Since 1970, the S&P 500 has posted a positive January in 33 years (59% of the time).* In those years, the index’s average full-year return was 16.4%, with gains in 29 of 33 years (88% of the time).** By contrast, in the 23 years with a negative January, the average full-year return was -0.68%, with gains in only 12 of 23 years (52% of the time).** While there is no guarantee that history will repeat in 2026, we believe a healthy macroeconomic backdrop and strong corporate profit growth help support the case for further equity-market gains over the course of the year.

Brock Weimer, CFA;
Analyst – Investment Strategy

^{Source: *FactSet **FactSet, Edward Jones, S&P 500 Price Index.}

Monday, 2/2/2026 p.m.

• Partial U.S. government shutdown in effect – A partial U.S. government shutdown took effect Saturday morning, as funding bills for six federal agencies have yet to be signed into law.** The Senate passed a bipartisan bill Friday night to fund five of the six agencies for the full year, while extending funding for the Department of Homeland Security for two weeks to allow for further negotiations.** However, the bill will still need approval by the House of Representatives, with a vote expected to take place tomorrow.* North American equity markets took the news in stride, with Canadian and U.S. stocks trading higher on Monday, supported by a better-than-expected ISM Manufacturing PMI reading for January.* The upbeat ISM report also put modest upward pressure on U.S. bond yields, with the 10-year Treasury yield rising to 4.28%.* Bond yields were little changed on Monday, with the 10-year GoC yield closing around 3.43%.*
  
  The shutdown will create temporary disruptions across the affected agencies, with some federal employees furloughed for the duration of the shutdown. However, furloughed workers will receive back pay once funding resumes, thanks to the Government Employee Fair Treatment Act of 2019. Importantly, a shutdown does not affect the government’s ability to service its debt, and Social Security payments will continue. A unique aspect of the current shutdown is that it is occurring at the start of tax season, which could delay return processing and refunds—an area of particular focus for 2026, as U.S. household refunds are expected to rise due to tax legislation passed in 2025.*** Additionally, a prolonged shutdown could delay key U.S. economic releases—such as labour-market and inflation reports—as they were last fall. The Bureau of Labor Statistics announced today that the shutdown will delay the release of tomorrow’s JOLTS report as well as Friday’s Employment Situation report.*
  
  While disruptive, the effects of government shutdowns are typically temporary. During the most recent shutdown, the Congressional Budget Office estimated that the lapse reduced fourth-quarter real GDP growth by roughly 1.5 percentage points, though it also projected that activity would rebound in subsequent quarters as federal spending resumes and employees receive back pay.*** While there are no guarantees in Washington, early reports suggest the funding bill passed by the Senate on Friday could move quickly through the House, helping to avert another prolonged shutdown and limiting the economic impact, in our view.
   
• Market and economic impact of government shutdowns – Unfortunately, government shutdowns have become far too common, with three occurring over the past decade and 21 since 1976.** While shutdowns can create temporary disruptions, financial markets have tended to look through them. During the most recent shutdown—the longest on record at 43 days—the S&P 500 rose 2%, the 10-year Treasury yield was little changed (rising from 4.1% to 4.14%), and the ICE U.S. dollar index increased by about 0.7%.* From an economic perspective, shutdowns tend to slow activity during the funding lapse, followed by a rebound in subsequent months. The Congressional Budget Office estimates that the 2025 shutdown reduced fourth-quarter annualized GDP growth by roughly 1.5 percentage points; however, a recent string of strong economic data suggests fourth-quarter growth remained robust, with the Atlanta Fed’s GDPNow tracker indicating growth of more than 4%.*
   
• Action for investors – The partial government shutdown does not alter our outlook for markets or the economy over the coming year. We continue to believe that a healthy global macroeconomic backdrop creates an attractive environment for stocks, and we maintain our overweight recommendation to equities relative to bonds. Within equities, we find U.S. stocks particularly attractive, supported by strong AI-related investment trends and resilient economic activity. In our view, the U.S. economy is also likely to receive incremental support from last year’s tax legislation during the first half of the year. Overseas, we view developed small- and mid-cap stocks and emerging-market equities as attractive opportunities as well. These segments may benefit from steady global growth and strong equity-market momentum in technology-heavy emerging-market regions. From a planning perspective, because we expect the shutdown to be short-lived, we don't anticipate meaningful financial-planning implications.

Brock Weimer, CFA;
Investment Strategy

^{Source: *FactSet **Committee for a Responsible Federal Budget ***Congressional Budget Office}

Friday, 1/30/2026 p.m.

• Markets mixed after Fed chair announcement – President Trump has announced that he will nominate Kevin Warsh to be the next Fed chair*. The U.S. dollar moved higher after the news*, with Warsh's experience at the Fed, and hawkish stance on inflation in the past, boosting his credibility with investors, in our view. Reactions in the bond market were mixed, with shorter-dated U.S. Treasuries posting a small rally, although longer-maturity bonds were a touch softer, potentially reflecting concerns that Warsh might push to lower the Fed's holdings of government bonds*. Finally, an initial sell-off in equity markets picked up momentum over the day, with investors likely questioning the timing and extent of interest-rate cuts under Warsh's leadership of the Fed*. Against this backdrop, interest-rate-sensitive small-cap equities were among the worst performers, with the Russell 2000 finishing 1.6% lower, while the S&P 500 index dipped 0.5%. Elsewhere, commodities continue to exhibit significant volatility, with large declines in gold (9%) and silver prices (28%)* contributing to a sharp dip in the S&P/TSX index, which has exposure to precious metals via its materials sector. WTI crude continues to move higher, rising to $66 a barrel amid escalating geopolitical tensions between the U.S. and Iran*.
   
• Warsh brings experience to the Fed – Kevin Warsh served on the Fed Board between 2006 and 2011 and his banking sector experience was seen as important in helping the Fed develop its emergency toolkit at the peak of the financial crisis*. Warsh was hawkish on inflation risks during this term, arguing for higher interest rates even amid painfully high unemployment after the financial crisis*. This stance seems to have softened in recent times, with Warsh lately making a case for lower interest rates, in part due to optimism that AI will raise potential growth and cool inflation*. For the time being, the FOMC looks happy to leave rates on hold, but Warsh could build consensus to ease policy later this year should inflation start to slow, and we expect one or two more rate cuts from the Fed*. Otherwise, Warsh opposed Fed purchases of government bonds after the financial crisis and maintains this view that the central bank should not hold large quantities of government securities*. In practice, shrinking the Fed's balance sheet could be challenging given that the withdrawal of this liquidity might spark volatility in short-term money markets, in our view.
   
• Don't lose track of fundamentals – Markets are naturally focused on the Fed chair announcement and what this might mean for U.S. monetary policy. However, we will only get a true sense of Warsh's views, leadership style and influence over the Fed when he takes up his position in the summer, in our view. Moreover, we think that the growth and inflation backdrop will remain critical in determining the Fed's next steps. This morning's PPI data for December pointed to some ongoing pipeline pressure from tariffs in segments of goods prices, and suggest that firms are becoming more inclined to pass these on to consumers to protect margins*, both of which point to continued short-term inflation pressures, in our view. Meanwhile, earnings season remains in full swing, with markets focusing on signals around AI investment from the mega-cap technology companies and the health of earnings across broader swaths of the economy*. Finally, the government is on track to shutdown tomorrow, although signs of a deal between President Trump and Democrats suggests this is likely to be short lived, in our view*. While the news flow has been relentless, we remain focused on the fundamentals around growth and corporate earnings and continue to favour a diversified exposure to U.S. large-cap and mid-cap equities, international mid- and small-cap equities, and emerging-market stocks too.

James McCann;
Investment Strategy

^{Source: *Bloomberg}

Thursday, 1/29/2026 p.m.

• Stocks pull back as materials and tech weaken – Major Canada and U.S. equity indexes ended lower for the day following some profit-taking in the materials sector, mixed U.S. tech results, and ongoing geopolitical uncertainty amid threats of military strikes in Iran*. Three of the 'Magnificent 7' reported last night—Meta, Microsoft and Tesla—with Apple set to release earnings after the close today. Meta shares rose 10% after the company raised its revenue outlook alongside higher AI spending*. In contrast, Microsoft fell 10% as elevated investment coincided with slowing cloud‑revenue growth*. Elsewhere, commodities experienced some volatility. WTI crude rose more than 3% to $65 a barrel after the White House warned Iran to accept a nuclear deal or face potential military action, raising concerns about potential disruptions to Middle East oil flows*. Geopolitical tension initially lifted precious metals, with gold climbing above $5,500 an ounce and silver jumping more than 6% before giving back most of these gains*.
   
• AI trends under the microscope - Last night brought the first wave of major tech earnings, with investors focused on results, guidance, and AI spending as a key market driver. Performance was mixed*. Microsoft lagged as higher spending and slowing cloud‑sales growth weighed on results, while Meta stood out with stronger‑than‑expected AI investments supported by an improved revenue outlook*. Tesla’s main highlight was its shift toward autonomous vehicles and robotics*. A clear theme is emerging, in our view. Companies are ramping up AI‑related infrastructure spending, and markets are rewarding those that can turn these investments into earnings*. Firms without a clear monetization path are facing more scrutiny. More broadly, the tech sector is still expected to deliver strong profit growth in the S&P 500, with AI remaining an important catalyst*. However, that growth is slowing from earlier quarters even as other sectors accelerate, supporting what we see as this year’s key theme: a broadening of market leadership*.
   
• Fed and BoC likely position for an extended pause - Yesterday’s both BoC and Fed meetings were relatively uneventful, with central banks leaving their policy rates unchanged, as widely expected*. For the BoC, the upcoming trade negotiations are a major uncertainty, but with rates at the low end of neutral, policy is mildly supportive. South of the border, after cutting rates at the prior three meetings, the Fed now appears prepared to move to the sidelines as risks to both sides of its mandate—inflation and employment—are receding*. The policy statement noted solid economic growth and signs of stabilization in the labour market*. In our view, the updated language suggests no urgency for another near‑term rate cut, and we do not expect further action under Chair Powell. That said, we believe the Fed’s easing bias remains. As the inflationary effects of tariffs fade by midyear, the Fed is likely to resume cutting, with one or two additional cuts as our base case. An extended pause may also lend support to the weakening dollar and help keep the 10‑year U.S. Treasury yield anchored, potentially in the upper half of our 4%–5% range. In Canada we see a 3%-3.5% range persisting for the 10-year GoC bonds. For equities, the implications are limited, in our view. Stocks continue to benefit from rising earnings, solid economic growth, and supportive financial conditions, but high expectations may trigger periodic setbacks.

Angelo Kourkafas, CFA;
Investment Strategy

^{Source: *Bloomberg}

Wednesday, 1/28/2026 p.m.

• Markets finish mixed as Bank of Canada, Fed conclude meetings – The TSX closed higher, while U.S. equity markets finished modestly lower on Wednesday as the Bank of Canada and Fed held rates steady, as expected*. The S&P 500 briefly reached 7,000 for the first time before pulling back*. The energy and technology sectors led gains, while interest-rate-sensitive real estate companies lagged*. Bond yields rose, with the 10-year Government of Canada yield at 3.43% and the 10-year U.S. Treasury yield at 4.24%*. In international markets, Asia finished higher overnight, while Europe was down*. The U.S. dollar advanced versus major currencies — following softening in recent days — likely benefiting from comments from Treasury Secretary Scott Bessent today that the U.S. will not intervene to support the Japanese yen*. In commodities, WTI oil traded higher, likely driven by a weaker dollar and severe weather in the U.S. that is impacting output*.
   
• Bank of Canada, Fed hold rates steady, as expected – The Bank of Canada (BoC) held its policy rate steady at 2.25%, in line with forecasts*. The BoC's statement noted that it expects inflation to stay close to the 2% target, with trade-related cost pressures offset by excess supply*. With Canada CPI at 2.4% and unemployment somewhat elevated at 6.8%*, the BoC is likely to remain on pause to continue to monitor inflation and labour markets, in our view. The Federal Open Market Committee (FOMC) concluded its January meeting today, deciding to maintain the federal funds target range at 3.5%-3.75%*. The FOMC statement noted that the unemployment rate shows signs of stabilization, while inflation remains elevated**. After three consecutive rate cuts in late 2025, the Fed appears poised to adopt a more patient stance***. The Fed's preferred inflation gauge — the Personal Consumption Expenditure (PCE) price index — has moderated to 2.8%* but remains above the 2% target, and the pace of disinflation has slowed. In our view, monetary policy appears close to neutral, generally estimated to be roughly 0.75%‒1% above inflation****. We expect the Fed to pause for at least a few months before considering additional cuts. In our view, a stabilizing labour market —characterized by a slow pace of both hiring and layoffs — should help keep the Fed on track for one or two more rate cuts later this year, assuming inflation continues to moderate.
   
• Earnings season in full swing – Fourth-quarter earnings season hits its stride this week, with Magnificent 7 companies Meta Platforms (Facebook), Microsoft and Tesla scheduled to report after market close today, followed by Apple on Thursday*. Earnings for S&P 500 companies are expected to rise about 9.6% year-over-year for the fourth quarter, led by the technology sector with over 25% growth*. Earnings growth is expected to broad-based as well, with eight of the 11 sectors forecast to report higher earnings*. We expect expansive earnings growth to support a broadening of market leadership. Robust 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 gains in 2026.

Brian Therien, CFA;
Investment Strategy

^{Source: *FactSet **U.S. Federal Reserve ***CME FedWatch ****Federal Reserve Bank of New York}