Market recap: Week ended May 29, 2026

Markets reacted to Middle East developments

Despite the Memorial Day closure in U.S. markets, Canada’s TSX rose 1% to a record closing high on Monday, led by gains in the technology and materials sectors. The TSX typically sees lighter trading volumes when U.S. markets are closed, averaging 65.5% of the standard level through the 2010s and 54.1% in the first half of this decade. On these occasions, the index posts gains more than 70% of the time. Optimism around a potential Middle East peace deal also supported investor confidence on Monday.

The TSX reversed course on Tuesday, falling 0.5% to snap a four-day winning streak. Sentiment grew cautious as peace deal prospects faded after Iran accused the U.S. of breaching a ceasefire agreement. The tech sector declined 1.6%, weighed down by a 3.2% drop in shares of Toronto-based Constellation Software. Financials also edged lower by 0.6% ahead of Canadian bank earnings reports, which began Wednesday.

When U.S. markets reopened, AI-driven optimism helped offset concerns about the rising tensions in the Middle East. The S&P 500 advanced 0.62% to a record closing high, while the tech-heavy Nasdaq climbed 1.18%. The Dow slipped 0.21%.

The TSX extended its losses on Wednesday, declining 0.7%, as oil prices settled lower and gold fell. This drove an energy sector drop of 2.4%, while the materials sector, which includes metal mining shares, retreated 2.2%. Consumer staples rose 1.3% and industrials gained 0.6%, helping offset the broader decline.

Despite comments from U.S. President Donald Trump on Wednesday highlighting unresolved issues with Iran, gains in health-care and consumer stocks pushed the Dow to a record closing high, up 0.37%. The S&P 500 edged higher by 0.02%, while the Nasdaq added 0.08%.

On Thursday, the S&P ‌500 and the Nasdaq increased 0.58% and 0.91%, respectively, both achieving record closing highs. This followed reports that the U.S. and Iran had reached a 60-day ceasefire agreement. The TSX and the Dow also closed higher, gaining 0.3% and 0.05%, respectively.

On Friday, the TSX edged 0.7% higher, as the prospect of an extended Middle East ceasefire continued to support investor sentiment. The TSX finished the month up 2.4%, marking its second consecutive monthly advance.

Wall Street also closed the week on a strong note, with all three major indexes reaching record closing highs on Friday. The Dow rose 0.72%, while the S&P 500 and Nasdaq gained 0.22% and 0.21%, respectively. For the month, the Nasdaq surged 8.36%, the S&P 500 climbed 5.15%, and the Dow advanced 2.78%.

Canada’s big banks posted quarterly profits

Canada’s big banks delivered a strong set of second-quarter results, with earnings broadly surpassing expectations despite lingering economic uncertainty.

• Bank of Nova Scotia posted earnings of $2.6 billion, up from $2 billion in the same quarter last year, supported by strength in its Canadian banking unit. Total revenue increased 8% to $9.8 billion, while expenses rose a more modest 2% to $5.2 billion.
• Bank of Montreal also exceeded expectations, driven by its capital markets business and U.S. operations. Profit climbed 34% to $2.6 billion from $1.96 billion a year earlier. Revenue grew 10% to $9.6 billion and expenses increased 6% to $5.3 billion.
• National Bank of Canada delivered quarterly earnings of $1.23 billion, up from $896 million last year, with gains led by strong performance in both its capital markets and retail banking divisions.
• Royal Bank of Canada reported profit of $5.5 billion, compared with $4.39 billion in the same period in 2025, benefiting from capital markets strength and lower provisions for credit losses.
• Canadian Imperial Bank of Commerce earned $2.47 billion in its fiscal second quarter, a 23% increase from 2025. Growth was broad-based, with higher profits across all business units. The bank also announced a deal to sell its Caribbean division for US$1.6 billion.
• Toronto-Dominion Bank reported earnings of $4.17 billion, up from $3.63 billion last year, beating expectations on stronger results from its Canadian banking and capital markets segments.

U.S. inflation and Canadian GDP data took focus

U.S. inflation accelerated in April, recording its fastest annual pace in nearly three years. The increase was driven by higher energy prices tied to the conflict with Iran. The personal consumption expenditures (PCE) price index rose 3.8% year-over-year, up from 3.5% in March, according to the Commerce Department’s Bureau of Economic Analysis. This marked the largest yearly increase since May 2023. Excluding food and energy, core PCE (the Federal Reserve’s preferred inflation measure) increased 3.3% year-over-year, compared with 3.2% in March.

Canada’s economy showed signs of weakness in Q1, according to Statistics Canada’s latest data. Gross domestic product contracted 0.1% on an annualized basis, following a 1% decline in Q4 2025, marking two consecutive quarters of decline, often considered a “technical recession.” However, on a quarter-over-quarter basis, GDP was flat, narrowly avoiding that designation. The GDP result also fell short of analysts’ 1.5% growth forecast. The last time the Canadian economy slipped into a technical recession was at the onset of the COVID-19 pandemic.