Market Recap: U.S. and Canada

It was a rocky start to the week, but the markets found their footing by the end of Friday’s trading session. The Nasdaq spent the first few days deep in the red before a sharp reversal took hold, and Canadian stocks did the opposite, leading the pack through midweek before giving back those gains by Friday.

As for the numbers, the Dow Jones led the way this week, up 0.53%, followed by the S&P 500, up 0.49%, and the Nasdaq 100, up 0.43%. The TSX lagged the pack, down 0.19%.

NEW SECTION: Notable Stocks This Week

Salesforce ($CRM) jumped 22% on Thursday after posting one of its strongest quarters on record and unveiling an expanded partnership with Anthropic. Revenue rose 11% to $11.35 billion and adjusted earnings came in at $5.90 a share, well above the $3.27 analysts expected, helped in part by a $2.6 billion gain on the company's Anthropic investment stake. It also introduced Claudeforce, a plugin built with Anthropic's Claude that can draft emails and update records for sales teams, framing AI as a tailwind for its own business rather than a threat.

CrowdStrike ($CRWD) climbed 20% on Thursday, its best day since going public, after fiscal second quarter results beat expectations across the board. Revenue rose 26% to $1.47 billion, and net new annual recurring revenue hit a record $333 million, up 51% from a year earlier. Management raised its full year guidance again, its ninth straight quarter of beating and raising, a streak that's helping justify a valuation many analysts still call rich.

SanDisk ($SNDK) fell about 6% on Monday after reports surfaced that the Trump administration may let Apple source memory chips from Chinese suppliers ChangXin and Yangtze Memory. The stock had already climbed more than 500% this year on sharply higher NAND prices and heavy AI related demand, so the pullback shows how sensitive the name has become to any hint of new competition. Analysts at Lynx Equity Research called the reaction an overreaction, noting neither Chinese supplier has qualified for Apple's core products yet.

TD Bank ($TD) rose on Thursday after posting the strongest earnings beat among Canada's Big Six banks this quarter. Net income climbed 38% to C$4.62 billion, or C$2.74 a share, with wholesale banking net income up 87% and the U.S. segment up 41%. Executives said they're planning 100 new U.S. branches by 2028, a sign the bank isn't slowing its cross-border push even as trade tensions with Washington weigh on the broader Canadian economy.

Major Economic Stories | At a Glance

Incomes Outpace Spending as Households Save More

Personal income rose 0.4% in July, outpacing a 0.2% gain in consumer spending as Americans banked more of what they earned. The personal saving rate climbed to 3.0%, with households tucking away $712 billion for the month even as paycheques grew.

• Disposable income: up 0.5%, an increase of $125.9 billion

• Spending mix: $86.2 billion increase in services spending, partly offset by a $49.9 billion drop in goods spending

• Real (inflation adjusted) spending: essentially flat, up less than 0.1%

• Income gains driven mainly by higher compensation, government benefits, and investment income

Fed's Favoured Inflation Gauge Refuses to Cool

Core PCE inflation held at 3.3% year over year in July, matching consensus and unchanged from June, while the headline measure ticked up to 3.7%, a touch hotter than expected. The reading shows the disinflation trend from earlier this year has stalled rather than reversed, leaving the Fed's preferred gauge still well above its 2% target.

• Core PCE monthly change: 0.2%, matching June's pace

• Headline PCE monthly change: 0.2%, a tenth above the median forecast

• Distance from target: core PCE running 1.3 percentage points above the Fed's 2% goal

• Next release: August data due September 30, alongside the BEA's annual accounts update

Canada's Economy Posts Its Best Quarter Since 2023

Canada's GDP grew 3.3% annualized in the second quarter, just below the 3.4% economists expected but comfortably ahead of the Bank of Canada's own 2.5% forecast. Exports jumped 15.1% annualized, the fastest pace in three years, as auto production rebounded and household spending held up.

• Q1 growth revised from 0.0% to 0.1% quarter over quarter, avoiding a technical recession

• Consumer spending: up 3.3% annualized, building on a 2.4% gain in Q1

• Per capita GDP: up 3.8% annualized, the fastest pace since late 2021

• Preliminary July estimate: flat, pointing to lost momentum heading into Q3

TOP INSIGHTS

Consumer Spending Growth Was an Inflation Illusion

In the U.S., nominal consumer spending rose 0.2% in July, but once you adjust for the month's price increases, real spending barely budged. That gap between the nominal and real numbers matters more than either figure on its own: the modest spending growth headline writers focused on this week was mostly a function of higher prices rather than stronger demand for goods and services.

For those of us trying to gauge how the U.S. economy is actually performing right now, this is the more useful number than the headline income or spending figures. Retailers and consumer facing businesses that had been counting on steady real volume growth this quarter are instead facing a customer base that's paying more for the same basket rather than buying more of it, a distinction that shows up in same-store sales and margins well before it shows up in GDP.

I think this is an early signal that third-quarter GDP growth could look softer in real terms than the nominal spending numbers suggest, even if the headline income and spending figures keep looking fine on the surface. I'm watching August retail sales when they land in a couple weeks for confirmation of whether real volumes are actually holding up or just tracking inflation.

Inflation's Progress Has Hit a Wall

US Core PCE inflation has now sat at 3.3% for two straight months, and Michigan's consumer sentiment survey shows households are increasingly convinced that's not changing anytime soon. Layer in Kevin Warsh's Jackson Hole comment that financial conditions look far from restrictive, and you have a Fed chair signaling the door is open to a hike just as the disinflation story from earlier this year has stalled out. That's a real shift in tone from where the conversation was even a few months ago.

On the ground, households are already behaving like they feel it. The personal saving rate climbed to 3.0% in July even as incomes grew, which means people are banking more of their paycheques rather than spending them, and that’s a pattern that shows up in caution, not confidence. With gas prices still sitting above $4 a gallon in a lot of the country, consumers are understandably bracing rather than spending, and that caution has real consequences for retailers and services businesses heading into the back half of the year.

I think the next move from the Fed is more likely a hike than a cut, and Warsh's Jackson Hole language was a signal rather than noise. The two-year Treasury yield will provide some confirmation. It already jumped on the speech alone, and I'd want to see it hold those gains before getting more confident in that call.

Canada's Growth Cushion Is Thinner Than the Headline Suggests

Canada's second quarter GDP print was genuinely strong, but most of the strength came from exports and a rebound in auto production, categories that swing hard in both directions rather than reflecting steady underlying demand. Statistics Canada's own preliminary read shows July growth was completely flat, and that tells you the quarter's momentum had already faded before the newest round of U.S. tariffs even took effect. The headline number is backward looking in a way that matters right now.

For homeowners and renters, the resale housing pickup in Ontario, Quebec, and British Columbia that helped drive this quarter's numbers cuts both ways: it's good news if you own, and it makes an already difficult affordability picture worse if you don't. For Canada's biggest banks, the strong quarter gave them room to keep building capital buffers against future loan losses rather than resting on this quarter's results, which tells you how seriously bank executives are taking the tariff risk even while posting record profits.

I wouldn’t bet my first-born on it, but at this point I think the Bank of Canada holds through the rest of this year regardless of how strong the Q2 headline growth number looked, because a flat July is a more honest signal than a strong second quarter average.

The Week Ahead

JOLTS job openings data for July land Tuesday, and another drop from June's 7.4 million openings would add to signs the labour market is cooling faster than the Fed would like.

The Bank of Canada announces its rate decision Wednesday, and after a stronger than expected second quarter, most economists still expect a seventh straight hold at 2.25%. The bigger question for markets is whether Governor Tiff Macklem signals any shift in tone as the trade war with Washington escalates.

Canada's August labour force survey also lands Friday, and after July's surprisingly strong 75,000 job gain, economists will watch whether the unemployment rate holds near its two-year low of 6.4% as trade uncertainty mounts.

The U.S. employment situation report for August also comes out Friday, and after July's surprising loss of 23,000 jobs, it's the release markets most want to see, since a stabilization would ease fears that the cooling labour market is turning into something worse.

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TOP STORY
Chipmakers Now Outshine Big Tech in AI Rally

• Nvidia's blowout earnings sent chip stocks broadly higher this week

• Chipmakers account for 37% of S&P gains this year

• Micron and Marvell have far outpaced Nvidia's own stock gain

• Microsoft and Meta shares are badly lagging chipmakers this year

Semiconductor companies have become the market's real leadership group this year, eclipsing even the Big Tech names that used to set the pace. Nvidia's latest earnings reassured investors that the AI buildout still has room to run, and the reaction rippled across the entire chip complex, lifting the Nasdaq to its best day in weeks. Meanwhile, Big Tech has spent the year pouring billions into AI infrastructure without much to show for it in its own share prices. Some strategists are drawing uncomfortable parallels to the late 1990s tech mania, though most argue the earnings underneath this rally are real, unlike back then.

The Concentration Risk Nobody's Pricing In

With chip stocks now responsible for more than a third of the S&P 500's gains this year, the index's fortunes are more tied to a handful of names than the headline numbers suggest. Capital Economics warned this week that if the new market leaders stumble, the broader market could be in serious trouble.

Where the Next Crack Could Show Up

Broadcom's earnings, due next week, will be the next big test of whether AI demand still justifies these valuations. A miss anywhere near the size of Marvell's recent stumble, which fell double digits even after beating estimates, could be enough to rattle the whole complex again.

Full story here.

This week's chip rally versus Big Tech's stumble has me thinking about how differently investors are treating hardware and software right now. Chipmakers have captured the lion's share of this year's AI related gains, while software names like Salesforce needed a blowout quarter just to claw back some lost ground. I'm curious to see what our community thinks about where the better opportunity sits from here. Please vote on this week's question:

LAST WEEK’S POLL RESULTS

In our last poll, I asked where our readers think the U.S. unemployment rate is headed by year end. The results were evenly split between the two leading choices:, 45% said higher and 45% said lower, with just 10% expecting no real change. Thanks to everyone who voted.

READER COMMENTS

Lower

"If the numbers can be trusted, I'm expecting a further decline in the U.S. unemployment rate between now and EOY...

The stock market embraced the lower jobs #, due to higher likelihood of rates remaining unchanged. What do I say to this? Careful what you wish for Mr. Market...“ — callawayguy

Higher

“higher if you factor in all the people that stopped looking for work. My real answer is ' things will get worse until the November election due to fears about the election being allowed to proceed without interference. If the Democrats win, and they could win both houses, things will get better, just because Trump will effectively be stopped. If his tariffs are rescinded, if the Iran war is over...when Iran lets it be, which they won’t until November. Maybe if CUSMA looks like it will be okay...then things might improve.' but Coles notes: unemployment will go higher.“ — mrrobpog

“We’ve been in a technical recession for about 3 years now and I don’t think we’re getting out anytime soon. With AI cutting into jobs, war going on, inflation still running, and government spending out of control, companies are going to keep cutting labour to survive. We’re not at the bottom yet, we’re just now getting to the ugly part.” — angellodarko

THE ECONOMY

Canada's Rebound Meets a New Trade War Test

• Canada's GDP grew 3.3% annualized in Q2

• Exports and a rebound in auto production led the growth

• Statistics Canada's preliminary estimate shows July growth was completely flat

• New tariffs threaten to test the economy's hard won resilience

As I covered above, Canada's economy delivered its strongest quarter of growth since early 2023, easing fears that a technical recession might already be underway. The rebound was broad based, with roughly 90% of the economy expanding, though economists were quick to note that momentum already appears to be fading heading into the back half of the year. The second quarter numbers came in just a touch below what economists had estimated, even as they cleared the Bank of Canada's own bar with room to spare. The bigger question now is whether this cushion is enough to absorb the next wave of U.S. tariffs.

The World Still Wants What Canada Sells

Energy is still the biggest swing factor for the Canadian economy, with the sector's strength fanning out into manufacturing, financial services, and logistics across the country. Analysts at the Macdonald-Laurier Institute say the bigger investment wave in resources has yet to arrive.

Uncertainty Will Do More Damage Than the Tariffs Themselves

The latest round of tariffs technically covers only a small slice of Canadian exports, but where they land, they'll land hard. Businesses making decisions under this kind of uncertainty tend to pull back well before any actual economic damage shows up in the data.

Full story here.

FIXED INCOME
Bond Market Braces as Fed Signals Rate Hike

• Two-year Treasury yields jumped sharply after Chair Warsh's speech

• Traders now price in a 58% chance of a hike

• The S&P 500 dipped slightly even as Warsh sounded hawkish

• Marvell shares fell 10% on lofty expectations

Once again, the bond markets moved more than stocks did this week after Federal Reserve Chair Kevin Warsh delivered his first Jackson Hole speech since taking the job. Warsh reiterated that he wants markets reacting to incoming data rather than to Fed guidance itself, but his comment that financial conditions look far from restrictive was read as a clear hint that rates may need to move higher. The reaction in the bond market was immediate, even as stocks barely budged.

Warsh Is Playing a Different Game Than His Predecessors

Unlike previous Fed chairs, Warsh has been explicit that he doesn't want to telegraph the Fed's next move through forward guidance. That approach puts more weight on each individual data release, and it's part of why markets reacted so sharply to just a few of his comments this week.

The Next Test Comes From the Labour Market, Not Warsh

As I touched on above, next week's employment data will carry outsized weight for how the Fed's rate path actually plays out. A soft print could complicate Warsh's hawkish framing in a hurry.

Full story here.

ENERGY
Trump Strikes Deal to Control Venezuela's Oil

• The deal covers 65 billion barrels of proven oil reserves

• The U.S. retains 55% control of the venture

• Rodriguez says the agreement will last 25 years

• Analysts question whether the arrangement can actually attract real investment

The United States has struck a deal with Venezuela giving it control over more than 65 billion barrels of the country's oil reserves, and Trump says the arrangement will help bring down gas prices for Americans. The agreement comes just months after U.S. special forces captured former president Nicolas Maduro, and it grants an American-backed joint venture a 100-year concession to operate in the country's oil fields. Venezuela's interim government has framed the deal as a path to economic revival, promising billions in new investment and tax revenue. Not shockingly, not everyone is convinced the numbers will hold up once the details are actually tested.

This Arrangement Has No Real Precedent

Energy analysts point out there's no real precedent for the U.S. government leasing rights to operate another country's oil fields at this scale. Whether that unprecedented structure survives legal and constitutional challenges in Venezuela remains an open question.

Don't Expect This to Move Oil Prices Anytime Soon

Even optimistic voices caution that Venezuela's aging infrastructure and weak power grid will limit how quickly new investment translates into actual barrels. Most analysts don't expect this deal to affect global oil supply in any real way for at least another year.

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.
📉A stock that is trading with an RSI below 30 is considered to be in “oversold” territory. This might suggest that the stock is due for a recovery, however it is not a recommendation to buy. Always perform your own due diligence.

*Harvest ETFs Disclaimer

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