Investment update

Weekly insight into the marketplace.

August 26 to 30, 2024

Markets were choppy throughout the week

On Monday, the resource-heavy TSX gained 0.27% to close at a record high. The energy sector led gains, as crude oil prices surged 3.50% over reports that Libyan oilfields had halted production amid domestic political turmoil. In the U.S., the Dow edged up to a new record, while losses in the tech sector weighed on the S&P 500 and Nasdaq. Tuesday saw the TSX take a step back, dipping 0.38%, as oil prices cooled off and investor attention turned to bank earnings. At the same time, the Wall Street stock benchmarks traded within a tight range. The Dow eked out a small gain of 0.02% to extend its record run, and the S&P 500 and Nasdaq each finished the day 0.16% higher. Investor sentiment remained unsettled on Wednesday ahead of the after-hours release of quarterly financial results by Nvidia – the chipmaking giant that led stock market rallies in the first half of the year. The major U.S. stock indexes traded lower in anticipation of those results, with the tech-heavy Nasdaq bearing the brunt and shedding 1.12%. The TSX fell 0.57%, as tech losses outweighed gains from the financial sector after better-than-expected bank earnings. Performance was mixed on Thursday. Shares of Nvidia fell over 8% heading into the opening bells despite an earnings report that showed the company met or exceeded all financial expectations. It seemed that investors were more concerned about production delays for its highly anticipated “Blackwell” chip. This weighed most on the Nasdaq, which closed the day with a 0.21% loss. The S&P 500 was flat, while the Nvidia-free Dow rose 0.59% to notch another record. The TSX fared well, rising 0.43%, supported by gains from the energy and financial sectors. Friday saw all the major benchmarks close higher to wrap up a volatile month. The Dow gained 0.55% to close at a record high and end the month 1.8% higher. The S&P 500 rose 1.01% to close 2.3% higher for August – its fourth-straight winning month. The Nasdaq rose 1.13% to end the month with a 0.70% gain after being down as much as 10.7% earlier in August. The TSX closed 0.51% higher for a monthly return of 0.51%.

Canadian banks reported financial results

Five of Canada’s Big Six banks released financial results for the fiscal quarter ending in July (TD bank had reported results the previous week). Scotiabank and Bank of Montreal were the first to report on Tuesday. Scotiabank shares rose 2.5% after its results showed profits were better-than-expected, despite more money being set aside for bad loans. BMO shares dropped 6.5% after it reported both lower-than-expected profits and rising loan provisions. On Wednesday, shares of RBC rose 2.2% and hit a record high after it reported better-than-expected profit of $4.49 billion for the quarter. Its recently completed acquisition of HSBC added $239 million to the company’s net income. Meanwhile, National Bank’s share price surged 5.9% after its earnings report beat estimates, with quarterly profit coming in at $1.03 billion. On Thursday, CIBC rounded out the financial reporting for the Big Six, posting both better-than-expected profit and lower provisions for bad loans.

Canadian and U.S. economic data supported the case for rate cuts

According to Statistics Canada data released on Friday, Canada’s economy grew at a 2.1% annualized pace in the second quarter. While the rate of expansion was faster than the Bank of Canada had forecast, overall growth declined on a per- person basis for a fifth-consecutive quarter, as the increasing population outpaced expansion. The Bank of Canada has cut interest-rates twice this year to support a soft landing for the economy as it cools off after years of elevated inflation. The bank is widely expected to cut rates again at its next policy decision on September 4. In the U.S., the Commerce Department’s latest personal consumption expenditures index report – the Federal Reserve’s preferred inflation gauge – showed that both core and headline inflation on a 12-month basis matched the numbers from June, bolstering expectations that policy-makers will start cutting interest-rates later this month.