Daily market snapshot

• Stocks finish higher: Major equity markets closed higher on Thursday, with earnings results from the world's largest company, NVIDIA, in focus. The TSX posted a gain of more than 1%, while the S&P 500 finished higher by roughly 0.5%.* Leadership was broad-based, with most sectors of the S&P 500 finishing higher, led by utilities and financials. Communication services was a laggard, falling by nearly 2% in response to a statement from the Department of Justice on Wednesday that Google should have to sell off its Chrome browser to address the monopolization of the online search market.* Overseas, European markets closed higher, while Asian markets were mostly lower overnight. Bond yields finished higher, with the 10-year GoC yield climbing to 3.45% and the 10-year U.S. Treasury yield ticking up to 4.42%.* In the commodity space, oil prices closed higher by roughly 2%, as concerns about an escalation in the war between Ukraine and Russia remain in focus.
• NVIDIA delivers strong results: With the economic calendar light this week, market focus is centered on earnings results from the world's largest company by market-cap, NVIDIA. NVIDIA announced quarterly earnings per share of $0.81 and revenue of $35 billion after the close yesterday, both of which were better than analyst expectations.* On a year-over-year basis, sales were higher by 94% while earnings per share were up 103%.* Strong performance from the company's data-center segment drove strong results as AI adoption continues to grow. While this quarter indicates ongoing robust demand for NVIDIA's chips, the midpoint for management sales guidance in the current quarter was only 1% above analyst expectations, the lowest since 2022.* After opening the day lower, the stock finished higher by roughly 0.5%.
• Jobless claims data point to healthy U.S. labour-market conditions: U.S. initial jobless claims for the prior week were 213,000, below expectations for 220,000 and below the previous week's reading of 219,000.* After a brief spike to 260,000 in early October, jobless claims have quickly receded and remain well below the 30-year median of 326,000.* With the U.S. labour-market in good shape and the recent U.S. CPI inflation report suggesting the path to the Fed's 2% target could be bumpy, markets are pricing in only a 50% probability of a 0.25% rate cut from the Fed at its December meeting.** In our view, another 0.25% cut from the Fed is likely in December. However, resilient economic activity and inflation running above the Fed's 2% target will likely lead to a shallower rate-cutting cycle in 2025.

Brock Weimer, CFA 
Associate Analyst 

^{Source: *FactSet **CME FedWatch Tool}

• Stocks are little changed as yields and the dollar rise - In the absence of major economic releases and ahead of NVIDIA's earnings, equity-market moves in Canada and the U.S. were muted today. The U.S. consumer sectors were under pressure, with shares of Target down about 20% after the retailer cut its full-year earnings outlook, warning that a flat sales quarter and a buildup in inventory hurt profitability*. The disappointing results are in stark contrast with the strong earnings Walmart reported yesterday. Elsewhere, European stocks were slightly higher, but U.K. stocks lagged after the latest inflation report came in hotter than anticipated, implying fewer Bank of England rate cuts. The U.S. dollar strengthened near the highs for the year against other major currencies, and the 10-year Canada bond yield rose to 3.38%, a four-month high*.
• All eyes on NVIDIA's results - After a nearly 200% gain so far in 2024, NVIDIA has become the world's most valuable company, carrying a $3.6 trillion market capitalization*. Given its outsized importance and influence on key indexes, investors will be closely watching the quarterly earnings results and outlook when the company reports after the market close today. Analysts are expecting another strong quarter driven by robust demand for artificial intelligence, with earnings growing 86% from a year ago*. NVIDIA is the last mega-cap tech company to report, marking the near end of the third-quarter earnings season. About 95% of the S&P 500 companies have reported earnings, with 75% exceeding expectations and delivering 6.6% earnings growth up from the 4.5% expected at the start of the earnings season*. After two back-to-back years of valuation expansion, we think earnings growth will be key in driving further stock-market gains in 2025.
• Key catalysts before year-end - Stocks remain on track for a strong finish to the year, underpinned by solid economic growth, rising earnings, and the start of a rate-cutting cycle. With the holiday season fast approaching, there are a handful of remaining key datapoints left to drive the market narrative. On December 6 investors will be focusing on the jobs reports in Canada and the U.S. to gauge the strength of the labour market. Last month's data was distorted by the hurricanes and strikes, so the upcoming release might provide a clearer picture of the underlying trend. Next will be the December 11 CPI release, the last inflation reading before the Fed's December meeting and rate announcement on December 18. We expect another quarter-point rate cut, bringing the policy rate to 4.5%-4.75%, but we will be looking for hints that the Fed will take a slower approach next year. Resilient economic growth, potentially looser fiscal policy, and an aggressive stance on tariffs and immigration may pose upside risks to inflation, which is why the bond market is looking for a shallower interest-rate-cutting cycle, with potentially two rate cuts in 2025 instead of almost five expected two months ago*. In Canada the BoC will have its last meeting for this year on December 11. Given the slight acceleration in this week's core inflation, we expect a quarter-point cut.

Angelo Kourkafas, CFA 
Investment Strategist

^{Source: *FactSet}

• Nasdaq leads stocks higher, shaking off Russia-Ukraine concerns – The TSX and major U.S. equity markets rose on Tuesday amid rising geopolitical tensions, as Ukraine began using U.S.-made weapons in Russian territory. Sector performance was mixed, as technology and communication services stocks posted the largest gains. In global markets, Asia was higher, as markets assessed commentary from the Bank of China ahead of the bank's interest-rate decision on Wednesday. Europe was broadly lower in a risk-off trading session. The U.S. dollar declined versus major currencies. In the commodity space, WTI oil and gold traded higher.
• Walmart earnings results provide look at consumer as focus turns to NVIDIA – Walmart released its third-quarter results, showing revenue grew 5.5% year-over year, above estimates calling for 4.3% growth*. The company also reported strong customer traffic across business segments. We believe these results provide another data point that reflects a resilient consumer going into the holiday season. Artificial intelligence (AI) leader NVIDIA will release its third-quarter earnings results on Wednesday, with estimates calling for earnings per share of $0.75. With 93% of companies in the S&P 500 having reported, earnings are on pace for about 5.5% growth year-over-year. Results have been strong relative to expectations, with 75% of companies beating analyst estimates*. Earnings growth has been broad, with seven of the 11 sectors delivering higher earnings*.
• Key inflation measure rises in line with expectations – Consumer price index (CPI) inflation for Canada rose 2.0% annualized in October, as expected, up from 1.6% the prior month. This reading returns inflation to the middle of the Bank of Canada's (BoC) 1%-3% target range, which likely keeps the central bank on its interest-rate-cutting cycle, as monetary policy no longer needs to be as restrictive. Lower interest rates should reduce borrowing costs for businesses and consumers, which is supportive of the economy.
• Bond yields mixed: The 10-year Government of Canada yield was up, near 3.32%, as bond markets trimmed expectations for outsized BoC rate cuts on the CPI report. The 10-year U.S. Treasury yield declined to 4.39% in a break from the broader trend higher in recent weeks, as bond markets have reduced expectations for Federal Reserve (Fed) interest-rate cuts**. The Fed's dual mandates of maximum employment and stable prices are returning to better balance as the labour market normalizes from a period of outsized strength and as inflation gradually moderates, which should keep the Fed on track to continue cutting rates, though the pace is likely to slow, in our view.

Brian Therien, CFA 
Investment Strategy

^{Source: *FactSet ** CME FedWatch}

• Stocks start the week higher – The TSX and major U.S. equity markets rose on Monday, regaining some of their losses from last week. Sector performance was broad, as energy and communication services stocks led markets higher. In global markets, Asia was mixed, as markets await the Bank of China's interest-rate decision on Wednesday and inflation data from Japan on Friday. The U.S. dollar declined versus major currencies. In the commodity space, WTI oil was up following an escalation in Ukraine and a production disruption in Europe*.
• Focus turns to NVIDIA results as corporate earnings season winds down – Artificial intelligence (AI) leader NVIDIA will release its third-quarter earnings results on Wednesday, with estimates calling for earnings per share of $0.75. With 92% of companies having reported, earnings are on pace for about 5.4% growth year-over-year. Results have been strong relative to expectations, with 74% of companies beating analyst estimates*. Earnings growth has been broad, with seven of the 11 sectors delivering higher earnings*. The sectors forecast to have lower earnings – energy, industrials, materials and utilities – represent about 17% of the market capitalization of the S&P 500*.
• Bond yields edge lower:

Brian Therien, CFA 
Investment Strategy

^{Source: *FactSet ** CME FedWatch *** Federal Reserve Bank of St. Louis}

• Stocks post a losing week, reversing half of the post-election gains - Major indexes remained on the defensive today, with stocks pulling back after the strong post-U.S. election rally last week. The Fed may take its time to ease policy, and rate-cut expectations have been trimmed, which is driving stock and bond volatility higher. The tech-heavy Nasdaq lagged, while the Dow, the TSX and the utilities sector outperformed. Elsewhere, Asia markets were mixed after China retail sales expanded at their fastest pace in eight months, indicating easing pressures in the economy*. Crude oil was lower and ended the week down almost 5%, as the International Energy Agency is forecasting a surplus in 2025 on robust U.S. production*.
• Cautious Fed messaging pushes yields higher - Treasury yields continue to see upward pressure, as the outlook for the Fed's rate-cutting cycle has been shifting. Jerome Powell signaled yesterday that the Fed is in no rush to cut interest rates, suggesting that policymakers could be open to skipping a meeting before lowering their policy rate again. Stocks yesterday pulled back in response to these comments, and bond markets lowered expectations for another rate cut next month, with the odds falling to less than 60% from roughly 80% a day earlier*. Given the stronger economic and inflation data in recent months, we think that there is no urgency with the pace of rate cuts, especially when considering the potential effect of various pro-growth but potentially inflationary policies coming from the new administration. Nonetheless, because the gap between the fed funds rate and inflation remains wide, we think that there is scope for rates to decline further next year, but possibly toward 3.5% - 4.0% instead of the 3.0% - 3.5% that we previously expected. Next month's decision may be a close call, but there is another set of inflation and employment data before policymakers meet again on December 17-18 that will help inform the decision.
• Canada manufacturing sales weak but likely improving, U.S. retail sales still solid – Manufacturing sales in Canada declined 0.5%, slightly better than the 0.8% drop expected*. While manufacturing has stayed weak, there are tentative signs that activity is potentially bottoming. New orders increased, while the manufacturing PMI is now back into expansionary territory. October U.S. retail sales increased 0.4% month-over-month, while September's number was revised higher to 0.8% from 0.4%. Strong vehicle sales boosted growth, but the underlying trend was more muted, with control-group sales – which exclude autos, gasoline, building materials and food services – falling 0.1% vs. consensus for a 0.3% increase*. While that was weaker than expected, the upward revisions to the prior months still point to strong consumer-spending growth in the last quarter of the year. Falling gas prices, solid income gains, and appreciating asset prices will likely continue to support consumption, which is one key reason why we think the economic expansion and bull market will extend through 2025.

Angelo Kourkafas, CFA 
Investment Strategist

^{Source: *FactSet}