Daily market snapshot

• 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}

• Stocks close mixed – The TSX closed higher, while major U.S. equity markets were down, taking a break from the post-election rally on Thursday. Sector performance was broadly lower, as only energy and technology stocks posted gains. Bond yields were also mixed, with the 10-year Government of Canada yield down to 3.27% and the 10-year U.S. Treasury yield rising to 4.45%, as Federal Reserve (Fed) Chair Jerome Powell commented that the Fed doesn't need to be in a hurry in cutting interest rates*. In global markets, Asia was mostly lower, while Europe was up. The U.S. dollar advanced versus major currencies. In the commodity space, WTI oil was up following a sell-off in recent days*.
• Key producer inflation measures edge higher – The U.S. producer price index (PPI) inflation rose to 2.4% annualized in October, slightly above estimates for 2.3%. Core PPI, which excludes more-volatile food and energy prices, ticked up to 3.1% on a year-over-year basis, compared with forecasts calling for 3.0%*. We believe these readings are consistent with inflation that continues to moderate gradually, though the path lower will likely be bumpy, at times potentially slower than market expectations. This progress should keep the Fed on track to continue its interest-rate-cutting cycle, though the pace will likely begin to slow as the central bank aims for a soft landing, in our view. The Bank of Canada should be able to continue cutting rates as well, with CPI of 1.6% in the lower half of the bank's 1%-3% target range.
• Jobless claims tick lower: U.S. jobless claims declined to 217,000* this past week, below expectations for about 224,000. We believe this reading reflects a resilient labour market that is gradually normalizing from a period of outsized strength. Employers appear to be slowly pulling back on hiring but not turning to significant layoffs. With unemployment of 4.1%, disposable income should be sufficient to support continued consumer spending going into the holiday season. A cooling labour market should also lead to slower wage gains ahead, which typically help ease inflation.

Brian Therien, CFA 
Investment Strategy

^{Source: *FactSet}