Daily market snapshot

• Stocks fall on tech weakness – North American equity markets closed lower on Wednesday, driven by weakness in the U.S. technology sector and hawkish leaning-commentary from the Fed. Semiconductor manufacturer NVIDIA announced that it will take a charge of up to $5.5 billion as a result of the U.S. government's decision to impose license requirements for exports to China on its chips.* In response, shares of NVIDIA declined by more than 6%.* Additionally, Federal Reserve Chair Jerome Powell provided an economic outlook speech this afternoon, highlighting that the tariffs announced by the U.S. administration have been much larger than anticipated and will likely lead to slower economic growth and higher price levels in the near term. Chair Powell also reiterated that the Fed will need to ensure that secondary effects of tariffs don't translate into persistently higher inflation, and acknowledged that Fed policy is well-positioned to wait to act until there is more clarity on the policy front. The hawkish-leaning commentary from Fed Chair Powell, along with export restrictions on NVIDIA chips, led to a risk-off move in markets, with the S&P 500 declining by 2.2%, while the tech-heavy Nasdaq declined by 3.1%.* Canadian equities fared better, with the TSX declining by only 0.4%.* Overseas, Asian markets were mostly lower overnight, despite a stronger-than-expected first-quarter GDP reading out of China, while European markets traded lower as well. On the economic front, the Bank of Canada held its policy rate steady at today's meeting, while U.S. retail sales for March were better than expected. Bond yields traded lower on Wednesday, with the 10-year U.S. Treasury yield declining to 4.28% and the 10-year GoC yield falling to 3.08%.*
   
• Bank of Canada in focus – After announcing interest-rate cuts at seven consecutive meetings, the Bank of Canada held its policy rate steady this morning at 2.75%. Over the past year, the BoC has lowered its policy rate meaningfully from a peak of 5%, as Canadian inflation has moderated toward the BoC's 1% – 3% target range.* Yesterday's inflation reading showed that headline CPI rose by 2.3% year-over-year in March, well within the BoC's target range.* However, with core measures of inflation such as both the CPI-median rising by 2.9% and CPI-trim rising by 2.8% annually in March, and with trade tensions between Canada and the U.S. easing recently (with Canada exempt from the April 2 tariff announcement), the BoC opted to hold its policy rate steady at today's meeting. In its comments, the Bank of Canada highlighted that the Canadian economy is slowing, as tariff announcements and uncertainty have led to a decline in business and consumer confidence. In our view, if economic growth shows meaningful signs of weakening, the BoC will likely deliver additional rate cuts in 2025.
   
• All eyes on the consumer – U.S. consumer-spending trends are in focus today, with retail-sales data for March slightly above expectations. Headline retail sales rose by 1.4% in March, above expectations for a gain of 1.3% and above the February reading of 0.2%.* The higher-than-expected retail sales number was driven by a surge in spending on motor vehicles and parts, which rose by 5.3% in March, perhaps driven by consumers looking to front-run auto tariffs. However, control-group retail sales, which excludes spending on more volatile categories such as gasoline, motor vehicles and building materials, rose by a healthy 0.4%, signaling broad-based strength in spending.* Until March, consumer spending had shown signs of fatigue in the first months of 2025, after growing at an above-trend pace for most of the past two years.* Last Friday's University of Michigan Consumer Sentiment Survey showed that sentiment fell to its lowest since June 2022 in April, as the uncertain policy backdrop has weighed on sentiment.* While consumer spending could soften over the coming months, U.S. labour-market conditions and household balance sheets remain healthy, which should prevent any slowdown in spending from turning into a prolonged contraction, in our view.

Brock Weimer, CFA
Associate Analyst

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 rise on tariff exemption for electronics – Canadian and global equities finished broadly higher after the Trump administration exempted smartphones, computers, semiconductors, and other electronics from "reciprocal" tariffs. That includes the 125% tariff on China and the 10% baseline tariffs on other countries. Trump also said he is exploring possible temporary exemptions on imported vehicles and parts to give auto companies more time to set up U.S. manufacturing. Small- and mid-caps outperformed, while the tech-heavy Nasdaq also rose on the news. However, optimism was contained by Commerce Secretary Lutnick's comments that the tech exemptions are temporary, as electronics will be covered by a separate sectoral tariff framework on semiconductors, which is expected to be announced in the next one to two months. Nonetheless, the news offered a welcomed reprieve to the escalating trade war. Additional support today came from signs of stabilization in the bond market, with the 10-year GoC yield falling to 3.13%*. 
   
• Tariff pause may help ease volatility - With U.S. stocks on the verge of entering a bear market, the U.S. administration softened its approach last week, announcing a 90-day delay on the implementation of the "reciprocal" tariffs, with the exception of China. The pause provides time for negotiations, potentially allowing countries to strike deals. Perhaps peak trade uncertainty is now behind us, even though businesses and investors are unlikely to get the clarity they seek right away. Negotiations will kick into high gear, but that process may take a while, and, in the meantime, there will likely be a mix of positive and negative headlines keeping volatility elevated. However, with volatility jumping last week to near historic extremes, there is more room for it to fall than rise. History also shows that fear creates opportunities for those that follow a disciplined and patient approach. Once the VIX, also known as the fear index, has exceeded 43 (it reached a high of 52 on 4/8/25), forward six- and 12-month equity-market returns have been strong*. 
   
• BoC and earnings next in focus - In a holiday-shortened week in honor of Good Friday, investors will be paying close attention to the BoC rate decision and corporate updates, as the first-quarter earnings season kicks into higher gear. On the central-bank front, since trade tensions with the U.S. have eased somewhat (Canada has avoided "reciprocal" tariffs) and core inflation has continued to surprise to the upside, we expect that the BoC will pause its rate cuts. With the policy rate in the middle of the bank's neutral range, policymakers will likely slow the pace of cuts until they get more information on how tariffs are affecting the economy. On the earnings front, with tariff risks looming, analysts have started to revise earnings estimates lower, but positive growth is still expected. The estimated earnings growth rate for the quarter is 7.3%, down from 18.2% in in the fourth quarter of 2024, with seven of the 11 sectors expected to deliver positive earnings growth*. Health care and technology are expected to experience the fastest earnings growth, while energy and materials are likely to see the largest earnings decline. For the full year, analysts are looking for the S&P 500 and TSX earnings to grow 10%*. As economic growth slows this year, we think that further downward revisions are likely. However, the upside of this down market 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 averages, potentially setting the stage for improved long-term returns*.

Angelo Kourkafas, CFA
Investment Strategist

Source: *FactSet

• Stocks rise on Friday to close out a volatile week – The TSX and U.S. equity markets were up on Friday, as earnings season kicks off, with materials and technology stocks posting the largest gains. The University of Michigan's preliminary consumer sentiment index, released this morning, fell for the fourth consecutive month in April to 50.8, missing forecasts of a smaller drop to 54.0.* The survey shows the impact of tariffs on consumer confidence, with expectations for inflation over the next 12 months rising to 6.7%, up from 5.0% in March.** While these readings could begin to affect consumer spending, they do not reflect the 90-day pause in new tariffs by President Trump, which could have a positive impact on surveys over the coming months. In international markets, Asia was mixed, as China raised its tariffs on imports from the U.S. to 125%, while Europe was down modestly.* Bond yields rose, with the 10-year Government of Canada yield at 3.24% and the 10-year U.S. Treasury yield at 4.49%. The U.S. dollar declined against major international currencies. In commodity markets, WTI oil traded higher following its steep decline in recent weeks*.
   
• Corporate earnings season off to a solid start – First-quarter earnings season kicked off this week, with the largest U.S. banks leading the way. J.P. Morgan Chase, Wells Fargo and Morgan Stanley each reported earnings that exceeded estimates. While forecasts for first-quarter earnings growth of S&P 500 companies have been revised lower to 6.4%, performance is expected to be broad, with seven of the 11 sectors forecast to report higher earnings year-over-year*. 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 10.5% for 2025,* which should provide solid fundamentals to support stock prices over time, in our view.
   
• Producer price inflation lower than expected – U.S. producer price index (PPI) inflation fell to 2.7% annualized in March, well below estimates calling for a modest increase to 3.3%*. Energy prices were a key contributor to the drop in headline wholesale inflation, down 4.0% month-over-month***. Core PPI inflation, which excludes more-volatile food and energy prices, declined to 3.3% on a year-over-year basis, compared with forecasts for 3.6%*. We believe these readings, though likely not meaningfully impacted by tariffs, indicate that inflation continues to moderate. We expect tariffs to put some upward pressure on inflation, as higher import costs are at least partially passed along to consumers. However, most of this impact should be near-term price hikes that aren't an ongoing driver of inflation, in our view.

Brian Therien, CFA
Investment Strategy

Source: *FactSet **University of Michigan ***U.S. Bureau of Labor Statistics

• Stocks pull back following historic rally yesterday – The TSX and U.S. equity markets closed lower today, as energy and technology stocks led to the downside. U.S. President Trump has announced a pause on the new tariffs for 90 days to allow for negotiations to potentially reduce tariffs and other trade barriers. Tariff rates for nearly all countries will move lower to 10%, except for China, for which they will rise to 145%.* Sectoral duties of 25% on steel, aluminum and autos remain in effect as well. In international markets, Asia rose sharply, led by Japan's Nikkei, which was up 9.1%. Europe was up 3% - 4% as well, as the European Union announced it will also pause its countermeasures to U.S. tariffs for 90 days.* Bond yields were up modestly, with the 10-year Government of Canada yield at 3.22% and the 10-year U.S. Treasury yield at 4.40%, but the U.S. benchmark yield remains below yesterday's peak of 4.5%. The U.S. dollar declined against major international currencies. In commodity markets, WTI oil traded lower on demand concerns, as trade tensions between the U.S. and China remain high*.
   
• CPI inflation falls more than expected – U.S. consumer price index (CPI) inflation fell to 2.4% annualized in March, below forecasts calling for 2.6%*. The energy component was down 3.3%** from a year ago, as lower crude oil prices flow through to gasoline and other energy commodities. Core CPI, which excludes more-volatile food and energy prices, dropped to 2.8%, compared with estimates for 3.0%. Shelter inflation slowed to a 4.0% pace, down from 5.6% a year earlier, providing a key driver in moderating inflation.* These readings, though likely not meaningfully impacted by tariffs, indicate that inflation continues to moderate. We expect tariffs to put some upward pressure on inflation, as higher import costs are at least partially passed along to consumers. However, most of this impact should be near-term price hikes that aren't an ongoing driver of inflation, in our view. Bond markets are pricing in inflation of about 2.27% over the next 10 years, indicating that long-term inflation expectations remain well anchored.***
   
• Jobless claims edge higher – U.S. weekly jobless claims rose to 223,000 this past week, slightly below estimates calling for 225,000*. Jobless claims have averaged about 223,000 over the past four weeks, which is about in line with the average for 2024*. While federal government layoffs will likely drive jobless claims higher in the months ahead, we believe these readings, combined with other recent data, indicate that the labor market remains healthy. The unemployment rate is still low at 4.2%, and 7.6 million job openings exceed unemployment of 7.1 million. Wage gains should remain above inflation, providing positive real wages to support consumer spending and the economy, in our view.

Brian Therien, CFA
Investment Strategy

Source: *FactSet **U.S. Bureau of Labor Statistics ***Federal Reserve Bank of St. Louis