Daily market snapshot

• Stocks finish higher: North American equity markets closed sharply higher on Thursday, with the S&P 500 logging its third consecutive daily gain of over 1.5%.* The TSX fared well on Thursday as well, gaining close to 1%.* From a leadership perspective, growth sectors of the S&P 500, such as technology and communication services, were among the top performers, while defensive sectors, such as consumer staples and utilities, were among the laggards.* On the corporate front, earnings remain in focus, with Alphabet scheduled to report after the market close today. Overseas, Asian markets were mixed overnight, while European markets closed modestly higher following a better-than-expected reading on business sentiment in Germany.* Turning to the economy, U.S. durable goods orders were sharply above expectations for March, driven by a surge in nondefense aircraft and parts, while U.S. initial jobless claims for last week remain contained at 222,000.* Bond yields finished the day lower, with the 10-year U.S. Treasury yield falling to around the 4.3% mark, while the 10-year GoC yield fell to 3.19%.*
   
• U.S. policy implications remain in focus: Equity markets are rebounding this week, with the TSX higher by roughly 2% and the S&P 500 higher by over 3% thus far.* As in recent weeks, policy implications from the U.S. administration have been in focus for investors. On Monday, stocks sold off sharply following concerns that President Donald Trump could seek to remove Fed Chair Jerome Powell prior to the end of his term in 2026. The past three trading days have seen North American equity markets recoup the Monday losses and then some, as U.S. President Trump stated he has no intent to remove Fed Chair Jerome Powell prior to the end of his term, helping ease investor concerns over Fed independence. Additionally, reports surfaced over the past two days that the U.S. could seek to lower tariffs on imports from China; however, no official plan has been released. With the S&P 500 having rallied roughly 10% since April 8, we believe a meaningful move higher from here would require substance on trade deals as opposed to rumors. Despite the uncertain policy overhang, market fundamentals remain broadly supportive. First-quarter S&P 500 earnings growth is on pace to rise by a healthy 7%, while TSX earnings are expected to grow by roughly 8%.* Additionally, while global economic growth has shown signs of slowing, as seen in yesterday's S&P Global PMI readings, the data thus far points to moderating economic growth but not an imminent recession.* While recent signs suggest that a de-escalation in the current trade war is possible, volatility could persist as negotiations take place. For this reason, we recommend investors maintain a long-term focus and stick with a well-diversified investment strategy aligned to their financial goals.
   
• Low U.S. jobless claims point to healthy labour market: U.S. initial jobless claims for last week were 222,000, slightly above the prior reading of 216,000, but well below the 30-year median of roughly 324,000, signaling healthy labour-market conditions.* Additionally, continued jobless claims, which measures the number of people who have previously filed an initial claim and are currently receiving unemployment benefits, fell by 15,000 from the prior week to 1.84 million.* The low level of jobless claims has been accompanied by healthy job growth in recent months, with March's U.S. nonfarm-payrolls report exceeding expectations. In our view, the pace of U.S. job growth is likely to moderate over the coming months, as businesses adjust hiring plans to the new policy backdrop and potentially slowing economic growth. However, the U.S. labour market and economy are entering this period from a position of strength, which could provide support if trade negotiations prove difficult to achieve over the coming months.

Brock Weimer, CFA
Investment Strategy

^{Source: *FactSet}
 

• Stocks mixed as tariff headlines continue – U.S. markets were modestly lower on Tuesday, while Canadian markets moved higher. Tariff headlines continue to drive markets. This week, the U.S. administration temporarily paused tariffs on consumer electronics, including smartphones and semiconductors, although it indicated that these will soon be added back to a new category of sector tariffs. In response, China also halted purchases and deliveries of Boeing jets and aircraft equipment from the United States. President Trump also is considering a potential pause on auto tariffs, which boosted the sector yesterday. But again, the administration noted this would be temporary to give carmakers some time to adjust supply chains. Overall, the tariff backdrop remains fluid, and the uncertainty has weighed on financial markets. While stocks had moved higher the past two days, the S&P 500 is down about 8% this year, while the Canadian TSX is lower by about 2.6%*. We would expect volatility to continue, in our view, until a more definitive tariff regime is established, although perhaps peak tariff rates are behind us. 
   
• A reset in stock valuations – While market returns have been negative this year, the upside is that valuations are now looking more compelling and are no longer stretched, which was a concern coming into this year. All major indexes are trading at or below their 10-year historical forward price-to-earnings multiples, potentially setting the stage for improved long-term returns. The S&P 500 forward multiple is now around 18 times next year's earnings forecast, down from a recent high of 22.7 times, while the Nasdaq forward multiple is about 21 times, down from its recent high of 30 times*. In our view, the spike in volatility, a reset in valuations, and signs that the worst-case scenario in the trade war appears to be averted suggest that stocks may find some support and try to carve out a bottom. Risks have risen, but a recession is not inevitable in our view, and stocks appear to have already priced in a significant degree of bad outcomes.
   
• Bank earnings surpass expectations – The first-quarter earnings season officially kicked off last Friday, with bank earnings in focus. Companies like J.P. Morgan, Goldman Sachs, Morgan Stanley and Citibank have all reported earnings thus far. Overall, the big banks have surpassed earnings expectations, primarily driven by higher trading revenue in equities and fixed income*. While the consumer has been resilient in the first quarter, and credit quality remains healthy, bank executives are pointing to uncertainty in the quarter ahead, given tariff volatility and the potential for higher inflation and slower growth. Capital-markets activity, including IPOs and mergers and acquisitions, has been particularly soft. Overall, we would expect corporate earnings to continue to be revised lower from the current forecasts of around 10% S&P 500 earnings growth. Earnings growth, however, should still be positive this year in our view, especially if the tariff backdrop stabilizes and the administration shifts its focus to tax reform and deregulation.

Mona Mahajan
Investment Strategist

Source: *FactSet

• Stocks close sharply higher – Equity markets rose on Tuesday, with financial and consumer discretionary stocks posting the largest gains, indicating a risk-on tone. Bond yields were down, with the 10-year Government of Canada yield at 3.19% and the 10-year U.S. Treasury yield at 4.40%. In international markets, Asia was mixed, while Europe closed higher, as European Central Bank President Christine Lagarde commented that disinflation for the region is nearing completion*. The U.S. dollar advanced against major international currencies. In commodity markets, WTI oil traded higher, as the U.S. issued new sanctions on crude from Iran*.
   
• Markets to turn attention to earnings releases of Magnificent 7 constituents this week – Tesla is set to report first-quarter earnings after market close today, with Alphabet to follow on Thursday. Though still early in the earnings season, with 16% of the S&P 500 companies reporting quarterly results, performance has been strong, as 76% have beaten analyst estimates, with an average upside surprise of 6.2%.* While forecasts for first-quarter earnings growth of S&P 500 companies have been revised lower to 6.9%, performance is expected to be broad, with seven of the 11 sectors forecast to report higher earnings year-over-year*. The sectors expected to experience earnings contraction represent about 14% of the market capitalization of the S&P 500.* Wider earnings growth should drive more balanced market performance across sectors, strengthening the case for portfolio diversification, in our view. In addition, earnings growth is expected to accelerate over the quarters ahead to 9.6% for 2025,* which should provide solid fundamentals to support stock prices over time, in our view.
   
• Preliminary services and manufacturing indexes to be released Wednesday - The S&P Flash U.S. Services PMI is forecast to edge lower to 52.5 for April, down from 54.4 the prior month*. Services PMI has remained above the key 50.0 mark that reflects expansion for more than two years straight.* Flash manufacturing PMI is expected to fall to 48.7, from 50.2 in March*. Overall, if the readings are close to these forecasts, they would be consistent with recent trends of services showing expansion, which should more than offset the modest contraction in manufacturing, in our view, as it represents a larger portion of the U.S. economy. Continued, though likely slower, economic growth would be supportive of the healthy labour market and consumer spending, in our view.

Brian Therien, CFA
Investment Strategy

Source: *FactSet

• Stocks close lower as Fed independence concerns add to tariff risks – The TSX was down, while U.S. equity markets closed sharply lower on Monday, as U.S. President Trump continued his criticism of Federal Reserve Chair Jay Powell and called for interest rates to be cut. Powell, whose term is scheduled to end in March 2026, does not directly control interest rates but does have influence as the chair and is one of 12 voting members of the Federal Open Market Committee (FOMC), which is responsible for setting the fed funds rate. Any move to remove Chair Powell would likely drive investor confidence lower, in our view, as it could bring into question the Fed's long-standing independence from political influence. Markets are also awaiting any updates on U.S. trade negotiations that are reportedly in progress*. In international markets, Asia was mostly higher, as China's central bank held interest rates steady, as expected*. Most markets in Europe were closed in observance of the Easter Monday holiday*. The U.S. dollar extended its decline against major international currencies. In commodity markets, WTI oil is trading lower as U.S.-Iran talks continue, which could boost supply if sanctions are loosened, while slowing economic growth could reduce demand*.
   
• Bond yields modestly higher – Bond yields rose, with the 10-year Government of Canada yield at 3.24% and the 10-year U.S. Treasury yield at 4.41%*. Bond markets are pricing in three or four interest-rate cuts by the Federal Reserve, likely starting in June.** The Fed's own projection for the fed funds rate – known as the "dot plot" – points to two rate cuts this year, which would put the policy rate in the 3.75% - 4.0% range***. We expect the 10-year Treasury to remain primarily in the 4.0% - 4.5% range this year, as we laid out in our 2025 Outlook. In our view, a positive yield curve should keep intermediate-term Treasury yields above the fed funds rate, which we see heading toward the 3.5% - 4.0% range. The Fed has ended its balance-sheet reduction program – known as "quantitative tightening" – allowing the central bank to participate more actively in Treasury bond auctions, likely helping support bond prices and keeping yields contained to the upside. Persistent government budget deficits and uncertainty relating to inflation could prevent yields from falling much further.
   
• Leading economic index falls but doesn't point to recession – The Conference Board's U.S. Leading Economic Index (LEI), which is intended to provide an early indication of significant turning points in the business cycle and where the economy is heading in the near term, fell 0.7% in March to 100.5, below estimates for a 0.5% decline.* Weaker consumer expectations for business conditions and the recent drop in the S&P 500 were the largest drivers of the drop. Higher weekly hours worked for manufacturing and the building permits for housing were the main positive contributors. Importantly, LEI's six-month change, while still negative, does not signal recession risk****. These readings indicate that growth is slowing amid tariff risks and policy uncertainty but do not point to a recession. Pro-growth policies, such as deregulation and tax cuts, should help support the economy later this year, in our view.

Brian Therien, CFA
Investment Strategy

Source: *FactSet **CME FedWatch ***U.S. Federal Reserve ****The Conference Board

• Stocks finish mixed – Equity markets were mixed on Thursday, with the S&P 500 and TSX posting modest gains, while the Nasdaq and Dow closed lower. From a leadership perspective, most sectors of the S&P 500 closed higher, led by the energy and consumer staples sectors, while health care and technology were among the laggards. Overseas, markets in Asia traded higher overnight, while European markets were slightly lower following the European Central Bank's decision to lower its policy rate by 0.25% to 2.25% at today's meeting.* Earnings remain in focus, with shares of UnitedHealth Group under pressure today after the company reported first-quarter earnings per share that were lower than expected and also provided lower-than-expected earnings guidance for 2025.* The decline in shares of UnitedHealth weighed on the performance of the Dow, with the index closing lower by roughly 1.3%.* On the economic front, U.S. initial jobless claims were lower than expected for last week, while housing starts for March were modestly below expectations.* Bond yields ticked slightly higher, with the 10-year U.S. Treasury yield closing around 4.33% while the 10-year GoC yield rose to 3.14%.*
   
• U.S. jobless claims tick lower – U.S. initial jobless claims for last week were lower than expected, falling to 215,000 from 224,000 in the prior week.* Despite concerns in recent months about layoffs, U.S. jobless claims remain well below the 30-year median of 324,000, signaling that layoffs up to this point have been limited.* In addition to low levels of layoffs, U.S. job growth has been steady in 2025, with nonfarm payrolls rising by 228,000 in March and averaging 152,000 thus far in 2025. While modestly below the average monthly pace of job gains in 2024 of 168,000, average monthly nonfarm-payroll growth of 152,000 still represents healthy job growth, in our opinion. While labour-market conditions could ease over the coming months as businesses adjust to the new policy backdrop and potentially slowing economic growth, we'd reiterate that the labour market and economy are entering this period of uncertainty from a strong starting point. While downside risks to the economy have certainly risen, a strong starting point could provide support to the U.S. economy.
   
• Diversification showing its merit in 2025 – After two consecutive years of outsized returns in U.S. large-cap stocks, overseas equities have outperformed thus far in 2025, rewarding investors with well-diversified portfolios. Developed overseas large-cap stocks, which include stocks from regions such as Europe and Japan, have been among the top performers, higher by over 3% through yesterday's close, while the S&P 500 is lower by roughly 10%.* Fiscal support out of Germany has provided a boost to sentiment for international developed stocks, while a weaker Canadian dollar has supported returns as well.* Canadian equities have outperformed U.S. stocks as well in 2025, with the TSX lower by roughly 2% through yesterday's close.* In our view, it's too early to call the recent outperformance in overseas equities the start of a prolonged period of overseas outperformance versus the U.S., and we believe that opportunities remain attractive in U.S. stocks over a one- to three-year time horizon. However, it does reiterate the value of maintaining a well-diversified portfolio. Incorporating allocations to a variety of asset classes can help smooth periods of volatility and help investors benefit from periods of rotating leadership.

Brock Weimer, CFA
Associate Analyst

Source: *FactSet

^{Overseas developed large-cap stocks represented by MSCI EAFE Index. Total return in CAD.}