Market Recap: U.S. and Canada

Mixed results in major markets this week, with Canadian equities holding up far better than their US counterparts. Nasdaq heavy tech names took a sharp gut punch Friday morning as the AI chip selloff intensified, but in true fashion, they clawed back some of that ground before the close. Blue chip and broad market benchmarks fared better throughout the week, but still finished in the red alongside the rest of the pack.

As for the numbers, the TSX led the way this week, essentially flat at down 0.07 per cent. The Dow Jones followed close behind, down 0.93 per cent, with the S&P 500 off 1.55 per cent. The Nasdaq 100 lagged well behind the rest, down 4.13 per cent, as AI related names bore the brunt of the selloff.

Major Economic Stories | At a Glance

Inflation Cools Sharply as Energy Prices Plunge

US headline inflation eased to 3.5 per cent year over year in June, well below the 3.8 per cent forecast and down from May's 4.2 per cent pace, as prices fell 0.4 per cent on the month, the sharpest monthly drop since April 2020. A sudden retreat in energy costs did the heavy lifting, with gasoline prices tumbling more than 9 per cent after the US-Iran ceasefire took hold.

• Energy index: down 5.7 per cent for the month, still up 15.7 per cent over the past year

• Shelter costs: up just 0.1 per cent, the mildest reading in months

• Airline fares: up 0.2 per cent in June, following a 2.7 per cent jump in May

• Next CPI release: July data due August 12

Core Inflation Undercuts Forecasts Too

Core CPI, which strips out food and energy, held flat on the month and eased to 2.6 per cent year over year, below the 2.8 per cent forecast and down from 2.9 per cent in May. Flat shelter and services costs did most of the work, a sign the inflation pressure that built earlier this year may be losing steam.

• Services excluding energy: flat on the month

• Medical services prices: declined in June

• Apparel prices: down 0.6 per cent, after rising 0.3 per cent in May

• Fed's 2 per cent inflation target: this reading sits 0.6 points above it

Bank of Canada Holds Steady for a Sixth Straight Meeting

The Bank of Canada left its overnight rate unchanged at 2.25 per cent on Wednesday, the sixth consecutive hold and in line with expectations. Governing Council pointed to signs of underlying improvement in growth even as it flagged ongoing risks from Middle East driven energy prices and US trade policy.

• Bank Rate: 2.5 per cent, deposit rate at 2.20 per cent

• 2026 GDP growth forecast: revised to 2.75 per cent

• 2027 GDP growth forecast: expected to rebound to 3.25 per cent

• Next scheduled decision: September 2, 2026

Retail Sales Grind Higher as Gas Station Receipts Slump

US retail sales rose 0.2 per cent in June, in line with expectations but a sharp slowdown from May's upwardly revised 1.0 per cent gain. Excluding a 5.3 per cent drop in gasoline station receipts, sales climbed a healthier 0.7 per cent, with online retailers again leading the pack.

• Nonstore retailers (e-commerce): up 1.9 per cent, the largest gain among major categories

• Year over year: total sales up 6.7 per cent from June 2025

• Second quarter (April to June): sales up 6.4 per cent from the same period last year

• Next report: July retail sales due August 14

TOP INSIGHTS

Inflation Is Cooling Faster Than the Fed Wants to Admit

In the U.S., both headline and core inflation came in below forecast this week, and as I repeat so often here, the details matter more than the headline. Energy did most of the work this time around, but the fact that core costs also undershot says that maybe disinflation isn't just a one-month mirage tied to a ceasefire.

This is the first genuinely good inflation print in months, and it translates into real relief at the pump and a touch more breathing room on borrowing costs down the line. For markets, it's a signal that the summer's energy driven inflation scare may be fading faster than policymakers expected. (This week’s renewed military action in Iran, though, may thwart those hopes.)

I think the Fed stays cautious here rather than declaring victory, especially with Warsh's team still building out a new communications framework. My read is that another soft print in July would be needed before rate cut chatter gets serious, so I wouldn't get ahead of the data just yet.

Retail Spending Looks Resilient, But It's Being Carried by Discounts and Clicks

Headline retail sales barely budged in June, the slowest pace in five months, as much of that softness traces back to falling gas prices rather than weaker demand. Strip that out, and spending held up reasonably well. Nearly all of that strength, though, came from online retailers, not the store floor.

It appears as though families will be spending the summer hunting for deals rather than spending freely, and retailers that lean into promotional timing are the ones capturing wallet share right now. That matters for anyone running a small business too, since foot traffic gains are harder to come by than a well-timed online sale.

July’s print will be important, since some of June's online strength almost certainly reflects Prime Day pulling demand forward. If July sales come in soft, it will tell us the resilience we saw this week was more timing than trend.

The Bank of Canada's Patience Is Becoming the Real Story

Six straight holds in a row has become a real pattern, and one that stands in sharp contrast to the overhaul happening south of the border under Warsh. Governing Council keeps pointing to improving growth even as it flags real risk from energy prices and trade policy, and markets seem comfortable taking it at its word.

For anyone with a variable-rate mortgage or a business loan tied to prime, this steadiness is worth something on its own, because it removes one layer of uncertainty from planning decisions. It also puts Canada on a different track than the US, where communication itself is being rewritten in real time.

I’ll be shocked if Bank of Canada doesn’t stay on hold through September, unless energy prices spill over into broader inflation. What I'm really noticing is the growing gap between how calm and how loud our two central banks sound these days, and history tells us that divergence usually shows up in the currency before it shows up anywhere else.

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TOP STORY
Apple Reclaims The Crown From Nvidia

• Apple's market value now tops Nvidia's for the first time since April

• Analysts credit services, ecosystem lock-in, and hardware upgrades for the shift

• Siri's overhaul last month is central to Apple's renewed AI narrative

• Nvidia surpassed a 5 trillion dollar valuation just last October

Although they ended the week virtually tied, Apple did take back its title as the world's most valuable company during the week, edging out Nvidia in a rankings shift that's been a long time coming. It's a notable turn for a company that’s spent much of the past two years looking like it was standing on the sidelines of the AI race while everyone else spent billions building models. Investors seem to be rewarding a different kind of AI bet now, one where Apple's massive installed base and steady upgrade cycle count for more than who has the flashiest model.

The iPhone Might Be Apple's Real AI Advantage

One investment strategist put it this way: Apple's real edge lies in the mountain of personal data already sitting on every iPhone, something no other AI company has at that scale, rather than in training the biggest frontier models. The catch is that data is locked away for privacy reasons, and unlocking its value without breaking that trust is the real challenge ahead. Siri's recent overhaul is Apple's first real attempt at proving it can compete on AI terms rather than just device terms.

This Rivalry Isn't Settled Yet

Of course Nvidia isn't going anywhere. Its chips are still powering most of the generative AI boom, and losing the top valuation spot for a few minutes, days or even weeks doesn't change that. What this does signal is that investors might be widening their view of who benefits from AI beyond the obvious infrastructure plays and this kind of broadening is exactly the environment where narrow, single-theme trades start to get retested.

Read the full story here

Apple's back in contention as the world's most valuable company after a wild week that saw it briefly trade places with Nvidia more than once. The two stocks have taken very different paths this year, with Apple's AI bet finally paying off in investor sentiment while Nvidia cools from its historic run. I'm curious how our community sees this playing out over the next twelve months. Here is this week's question:

LAST WEEK’S POLL RESULTS

In last week's poll, I asked how the "Battle of the Booze" has changed your drinking habits. Just over half of you, 55 per cent, said you've actively sought out Canadian alcohol, while another 26 per cent say they're drinking less overall, showing this trade dispute has genuinely shifted buying habits rather than just prompting a few substitutions. Thanks to everyone who voted.

READER COMMENTS

Actively sought out Canadian alcohol

"Going out of my way to purchase Canadian products even if the price is higher. I will buy some American products but they have to be good quality and much CHEAPER!" — mslobogean

"Anything but US wine - Canadian, Italian, Spanish, Portuguese, Australian, Chilean...." — syoungconsultinginc

"There are so many great local distillers that it's not hard to find unique high-quality products to replace imported spirits. In BC we're blessed with a significant amount of excellent wineries so that also isn't an issue - my wife and I have long bought within BC." — sub

"Even if US alcohol is allowed back on the shelves in my province, I will personally not buy American anyway. The goodwill towards anything American is flat out gone forever in my world." — philip.swan

Not changed your buying habits at all

"It hasn't really affected me since I don't often drink American alcohol, but I do support the boycott." — mcblue

"I buy BC wines so I haven't been inconvenienced at all in this regard. The Rum and Gin I drink are not US, and beer...well, who would drink American beer?" — mrrobpog

THE FEDERAL RESERVE

Wall Street Builds Its Own Fed Translator

• WarshGPT parses nearly 1,800 Warsh documents to model his thinking

• June's Fed statement ran roughly 130 words, down from over 300

• Warsh devoted just 5% of press conference sentences to policy specifics

• The tool cost under $1,000 to build using Anthropic's Claude model

I’m not sure what effect it will have on our ability to anticipate the direction of the economy, but I have to admit I kind of like it that Fed Chair Kevin Warsh has made it clear he wants the Fed to say less, and Wall Street is scrambling to fill in the blanks. It’s a bold move. One asset manager, F/m Investments, built an AI chatbot to get a read on how Warsh thinks about the economy and monetary policy, a playful jab at OpenAI's ChatGPT that's also a genuine response to a real problem. As one portfolio manager put it, investors built a whole business model around decoding typical Fedspeak, and now the chairman has flat out told them that he's going quiet.

Forward Guidance Is Becoming A Thing Of The Past

The shift in tone traces back to Warsh's very first meeting as chair in June, where he trimmed both the length and the substance of the post-meeting statement dramatically compared to his predecessor, Jerome Powell. He's called this shift intentional, and says the shorter language purposefully leaves out forward guidance, the practice of signalling where rates are headed months in advance.

Expect More Tools Like This, Not Fewer

As I say, I think this kind of communication overhaul is arguably the more consequential Fed story this year, more so than any single rate decision. Warsh has also launched four other task forces this year, covering everything from the Fed's balance sheet to how it measures productivity. My take is that Warsh is playing a longer game than markets are pricing in, and the through-line across every task force is the same: less institutional hand-holding, more responsibility pushed onto investors to figure it out themselves. I like it.

Full story here.

THE ARTIFICIAL INTELLIGENCE RACE
China's Kimi K3 Narrows The AI Gap

• Zhipu shares fell as much as 30%, MiniMax slid roughly 15%

• Full model weights won't be public until July 27, 2026

• The model carries a 1 million token context window for text and images

• Pricing undercuts OpenAI's top model by roughly half

Chinese startup Moonshot AI dropped Kimi K3 this week, a 2.8 trillion parameter open-source model the company says goes toe-to-toe with the best systems from Anthropic and OpenAI. On several benchmarks, including coding and general agent tasks, Moonshot claims it beat out Claude Opus 4.8 and GPT 5.5, although it still trails the true frontier models on overall performance. The release lands at a pointed moment, arriving just as the global AI race between the US and China keeps intensifying and open-weight models keep closing the gap with proprietary ones.

Price Is Becoming As Important As Performance

What stands out to me isn’t so much the benchmark scores, but more the pricing, which is positioned close to Anthropic's mid-range tier. For any company running AI at scale, a model that performs competitively for noticeably less money could be a real budget decision.

Watch The Reaction From China's Own AI Sector

The release hit Moonshot's domestic rivals hard, which plunged on the news. Zhipu and MiniMax tumbled sharply in Hong Kong by about 27% and 16% respectively. Clearly the competitive pressure inside China's AI sector is intensifying just as fast as the pressure between China and the US.

Learn more here.

INVESTING
AI Chip Stocks Slide Again

• Intel, Applied Materials, and Corning also fell sharply on the day

• Micron is still up 197% this year, Sandisk up 471%

• Futures now price roughly even odds of a rate hike by September

• AMD, worth about 800 billion dollars, slipped more than 1%

AI chip stocks kept sliding Friday, extending a rough patch that's dogged the sector for weeks. The slump followed Thursday's earnings from TSMC, which actually beat expectations on both profit and revenue, but investors focused instead on the company's plan to spend even more on capital expenditures than previously forecast. Even Nvidia, still the biggest name in AI chips, fell 2.2% on the day, and the broader Nasdaq closed down 1.4%, with the S&P 500 and Dow also lower. The SMH semiconductor index, which tracks the 25 largest US chipmakers, is now down 9.5% compared to a month ago.

Profit Taking, Not Panic, Looks Like The Real Driver

This ties directly into the same rate uncertainty shaping markets right now. Analysts are largely chalking this selloff up to profit taking after a long run-up in prices, and not necessarily a real shift in sentiment toward AI itself.

The Bigger Question Is Whether AI Spending Pays Off Fast Enough

Critics argue the sheer scale of AI investment demands outsized returns soon, not years from now, and there's limited evidence yet that businesses or everyday users are extracting enough value to justify the spending. Supporters counter that a lag between building infrastructure and seeing the payoff is normal, and they point to how long it took the internet to translate into real economic gains. A fair statement is that this selloff says less about AI's prospects and more about how stretched valuations have become after such a long run, and that's a distinction worth remembering the next time a single earnings report from TSMC, or any other company, moves the entire sector.

Full story here.

The Relative Strength Indicator (RSI) can provide a signal that suggests a stock is either overbought or oversold.
📈A stock that has an RSI over 70 is considered to be in “overbought” territory. This might suggest that the stock is due for a pullback, however it is not a recommendation to sell.
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