Investment update

Weekly insight into the marketplace.

February 24 to 28, 2025

Stock markets closed out a volatile February

It was a tepid start to the week for stock markets. Investors remained cautious over economic growth and trade risks as they waited for earnings reports from several high-profile companies to come later in the week. While Canada’s resource-heavy TSX was flat on Monday, the Wall Street benchmarks were mixed. The broad-based Dow closed with a small gain, while technology stocks weighed on the S&P 500. The tech-heavy Nasdaq also took a hit, losing 1.21% on its way into negative territory for the year. Tuesday saw the TSX advance 0.21% with financial, industrial and utilities stocks offsetting weakness from the energy sector. In the U.S., the Dow posted another modest return. But tech continued to curb progress for the S&P 500 and Nasdaq, with the latter giving up another 1.35% after a Conference Board report showed that U.S. consumer confidence was at its lowest level in nearly four years. The script reversed on Wednesday, as tech stocks buoyed returns on both sides of the border. The TSX added 0.49% on its way to a third-straight winning session. The Dow lost 0.43% while the S&P 500 was flat. The Nasdaq posted a 0.26% gain, with help coming from shares of Nvidia, which rose 3.7% in the lead up to its much-anticipated earnings report. After markets closed, the AI behemoth reported earnings per share that topped estimates by over 5%, setting up a positive outlook for 2025 driven by high demand for its Blackwell AI chips. But momentum from Nvidia’s results was short lived. The company’s shares plummeted over 8% on Thursday, as investor sentiment soured after U.S. President Donald Trump reaffirmed that planned tariffs against Canada and Mexico would proceed on March 4. The Nasdaq led losses on Wall Street, falling 2.78% on the day. The TSX lost 0.79%, with shares of Canadian bellwether Shopify weighing heavily on performance over reports that the e-commerce giant may move its head office to the U.S. On Friday, the TSX bounced back, rising 1.06% supported by financial and industrial stocks, but closed the month of February with a 0.60% loss. U.S. stock markets also rallied, with the Nasdaq and S&P 500 each advancing 1.6% on the day, while the Dow climbed 1.39%. On a monthly basis, the Nasdaq lost nearly 5% in February, and the S&P 500 and Dow dropped around 2%.

Canada’s "big six" banks reported financial results

All of Canada’s big six banks reported financial results for fiscal Q1 that beat analyst expectations. The strong results were largely driven by wealth management and capital markets units, as trading demand increased in response to shifting economic conditions in the quarter. BMO reported adjusted earnings per share of $3.04, led by its capital markets business, which posted adjusted net income of $591 million. That number rose 45% from $408 million a year ago, amounting to record revenue of $2.07 billion. Scotiabank reported adjusted earnings of $1.76 per share, with the bank’s global markets and banking division seeing a 33% rise in net income to $517 million in Q1. CIBC’s revenue was $7.3 billion in Q1, up 10% from the previous quarter and up 17% year-over-year. Adjusted net income came in at $2.2 billion, up 26% from last year, with income from capital markets up 19%. National Bank reported adjusted net income of $1 billion for Q1, up 14% year-over-year, and revenue of $1.2 billion. Its financial markets division saw a 40% increase in income. RBC earned $3.62 per share in Q1, as its capital markets income rose 24%. TD came in at $2.20 earnings per share, with 14% income growth from capital markets. The good news was tempered, however, by all banks noting the potential impact of U.S. tariffs on future loan-loss provisions.

Economic data dampened sentiment

The U.S. Commerce Department’s second reading of Gross Domestic Product (GDP) showed the U.S. economy grew at an unrevised annual pace of 2.3% in Q4 2024 (down from 3.1% in Q3). For all of 2024, the U.S. economy grew 2.8% compared with 2.9% in 2023. The department’s outlook for 2025 sees the economy contracting even further, slowing to 2.3% as job growth and consumer spending continue to cool. Unemployment data released Thursday showed that applications climbed to 22,000 last week, the highest level this year. Unlike the GDP figure, the Commerce Department upwardly revised the personal consumption expenditures index (PCE) index to 2.4% annually for last quarter. Core PCE, which excludes volatile food and energy prices and is the Federal Reserve’s preferred inflation gauge, was also revised to 2.7% from 2.5%. Canadian GDP figures, released by Statistics Canada on Friday, showed the economy outpaced expectations in in Q4, rising 2.6% on an annualized basis, fuelled by a surge in household spending. This suggests the Canadian economy had momentum heading into 2025, but the threat of U.S. tariffs has clouded the outlook.