The Week in Review

Weekly Market Recap: U.S. and Canada

It was like a tale of two markets this week, with tech stocks rallying strongly on optimism surrounding potential rate cuts, and industrials struggling amid concerns about economic growth. Broader indices saw cautious gains.

In terms of weekly performance, the Nasdaq 100 rose 3.26%, leading the pack, while the S&P 500 posted a respectable 0.84% gain. The TSX edged up 0.22%, while the Dow Jones lagged with a 0.65% decline.

S&P 500 Returns | Week At-a-Glance

TSX Returns | Week At-a-Glance

Major Economic Stories

When you look at this week’s labour market releases, you clearly see a market at a crossroads. The U.S. saw strong job growth with an uptick in unemployment, which says we’re seeing an easing labour market, while at the same time Canada’s unemployment rate hit its highest level since 2021, a strong hint of deeper structural challenges.

Here’s how things played out:

Canada Unemployment Hits 6.8%, Labour Market Softens

Canada’s unemployment rate rose to 6.8% in November, its highest level since 2021.

A strong rise in the labor force drove the increase, overshadowing modest employment gains.

• Unemployment jumped by 87,300, reaching 1.52 million people.

• Employment rose by 50,500 jobs, mostly in public sector roles.

• Participation rate climbed to a three-month high at 65.1%.

• Wages grew 4.1% annually, slowing from October’s 4.9% pace.

U.S. Job Growth Accelerates; Unemployment Rises

November saw a strong rebound in U.S. payrolls, adding 227,000 jobs, but the unemployment rate ticked up to 4.2%.

• Average job gains now sit at 150,000 monthly.

• Health care and leisure led the rebound with 54,000 and 53,000 jobs added, respectively.

• The participation rate edged down to 62.5%.

• Retail trade lost 28,000 jobs, reflecting headwinds in consumer-facing sectors.

U.S. JOLTS Beat Expectations

Another sign of the continued U.S. labour market resilience in October was job openings climbing to 7.744 million, beating expectations.

Growth was concentrated in sectors like professional services and hospitality, but regional disparities showed mixed economic conditions across the country.

• Job openings rose by 372,000, beating market expectations of 7.48 million.

• Professional services (+209,000) and food services (+162,000) led gains.

• Openings surged in the South (+486,000) but fell in the Northeast (-195,000).

• Total hires and separations remained stable at 5.3 million.

Key Takeaways From this Week’s Economic News

Canada’s Labor Market at an Inflection Point

Canada’s rising unemployment rate paints a concerning picture. The addition of 50,500 jobs does suggest some underlying resilience, but the jump in job seekers highlights a growing mismatch between labor supply and demand. The public sector's dominance in job creation is also a concern as it may not reflect sustainable economic growth. A potential 50-basis-point rate cut next week by the Bank of Canada could provide some relief, but the weakening Canadian dollar and trade uncertainty remain significant risks.

U.S. Job Growth Sends Mixed Signals to Fed

November’s U.S. jobs data continues to show the resilience of the labor market even though some signs of softening are mixed in, such as the rise in unemployment. Growth was concentrated in sectors like professional services and hospitality.

The markets are expecting another Fed rate cut in a couple of weeks, which confirms its confidence in managing a soft landing. The stability in hires and separations suggests that while employers remain cautious about layoffs, labor mobility is not increasing significantly. As I see this, it will continue to be a delicate balancing act for policymakers in 2025.

Monetary Policy Divergence: U.S. vs. Canada

The U.S. and Canada are approaching monetary policy from starkly different angles. The Fed is cautiously easing rates against a backdrop of strong economic fundamentals, while the Bank of Canada faces mounting pressure to address sluggish growth and labor market weaknesses. This divergence could (probably will) weigh on the Canadian dollar further and increase borrowing costs for businesses reliant on U.S. imports. The next few months will be critical for both economies.

THIS WEEK’S POLL QUESTION
(Results in Next Week’s Newsletter)

As I say often in my commentary, both the Bank of Canada and the U.S. Federal Reserve have a tough balancing act on their hands. Earlier this year both starting cutting rates and at the time, most expected rates to continue to go down into 2025.

But now with the latest jobs data out on both sides of the border, I can’t help but wonder whether this will force the central banks to rethink their strategies in 2025.

What do you think? Answer this week’s poll question and share your thoughts.

LAST WEEK’S POLL RESULTS

The results this week came in right about where I would have expected. For the record, I believe both options are real possibilities, but given Trump’s propensity for making bold statements without really having thought things through, I’m leaning more toward the ‘threat’ option, and I hope I’m correct on this one. “Real” would not have a good outcome.

Comments of the Week

👍 They are Real, and they will hurt.

“Trump obviously wants to rip up USMCA. He want to open trade here that Canada is protecting (published yearly in Congress). Banking, telecom, airlines, supply management are a no goes for foreign ownership and expansion. We can't compete with the industrial might of the US and tariffs will us and our small industries. If we open up it has to be a two way street.” - ddamude

“It is not as black and white as that. There have clearly been conditions set with the control of the border, in our case the northern border. While the free trade comes into these conditions too, it is without saying that Homan will certainly play a pivotal role in these threats.” - aelaan

“To see the strength of the threat you need only look at the people he is putting in government. His choices are a great concern & put the idea of peace across the border in a whole different light. Once again it shines the light on Canada's inability to rebalance its trade options & is still very reliant on US Trade. Canada has had a great opportunity to realign its trade with Europe, & SE Asia with its signed trade agreements after the last Trump fiasco but once again have failed.” - entender1012

EMPLOYMENT & THE ECONOMY
Canada’s Unemployment Rate Jumps to 6.8%  

• Jobless rate hit 6.8%, highest since 2021 (excluding pandemic years).

• Employment grew by 50,500, driven by public sector hiring.

• Canadian dollar fell below 71 U.S. cents, hitting multi-year lows.

• Odds of a 50-basis-point BoC rate cut rose to 83%.

We saw a dramatic jump in Canada’s unemployment rate in November, even in the face of strong job creation. Employment gains doubled expectations but were offset by 87,300 new job seekers entering the market. Most of the new jobs came from the public sector, and this should raise some concerns about the sustainability of labour market improvements. The participation rate also rose to 65.1%, a three-month high, an indication that more Canadians are actively seeking work.

Monetary Policy Implications

So, what does this tell us? The spike in unemployment reinforces bets on a larger-than-expected Bank of Canada rate cut on Dec. 11. Analysts now favor a 50-basis-point reduction, pushing the key rate to 3.25%, as policymakers try and tackle slow economic growth. But it’s not always that straightforward, and the weaker Canadian dollar and mixed signals on inflation could limit the BoC’s ability to sustain aggressive easing.

Broader Concerns for Canada’s Economy

The labour market’s fragility might be pointing to concerns about structural weaknesses. Sluggish wage growth, slowing private sector hiring, and a sharp rise in joblessness among youth (13.9%) point to persistent challenges. Add to that global trade uncertainty, and Canada’s recovery trajectory remains uncertain.

Read the Full Story here.

FEDERAL RESERVE BOARD
Fed Signals Rate Cut; 2025 Outlook in Focus   

• Fed likely to cut rates in December, with an 89% probability.

• U.S. job growth rebounded, averaging 150,000 over recent months.

• Debate intensifies over pausing rate cuts in early 2025.

• Inflation remains stickier than anticipated, complicating Fed policy.

November’s U.S. labor report provided a mixed but encouraging picture. The addition of 227,000 jobs reflects ongoing strength, though unemployment rose slightly to 4.2%. These figures might give the Fed confidence that easing won’t overstimulate the economy.

Chicago Fed President Austan Goolsbee highlighted the labor market’s “sustainable full-employment kind of space,” signaling readiness for a December rate cut to the 4.25%-4.50% range.

Debate Shifts to 2025 Monetary Policy

A December cut is now a near certainty, but we’re sill hearing about divisiveness when it comes to 2025 policy. A lot of analysts are now predicting a pause after the December cut, mainly due to conflicting inflation and growth signals. Fed Governor Michelle Bowman urged caution, citing persistent inflation risks, while Fed Chair Jerome Powell underscored the need for “careful” management as the Fed nears its inflation target. This careful stance may lead to slower rate cuts next year.

Implications for Markets

Markets have responded optimistically, and we’ve seen U.S. Treasury yields falling and equities rallying. However, some expectations of an additional 75 basis points in cuts for 2025 may hinge on future inflation data. The Fed will have to continue to manage the balancing act of cooling inflation without stalling growth.

Read the Full Story here.

BANKING SECTOR
Canadian Big Banks Post Mixed Earnings  

• RBC, CIBC, and National Bank outperformed analyst expectations.

• TD, Scotiabank and BMO missed estimates.

• Mortgage renewals in 2025-2026 may spark a rate war.

• Some loan-loss provisions remain elevated, reflecting economic uncertainty.

Canada’s largest banks reported a mixed bag of Q4 results this week, with some showing resilience and others grappling with higher provisions for credit losses. RBC led the pack with $4.2 billion in quarterly earnings, supported by its acquisition of HSBC Canada. On the other hand, TD Bank fell short, citing challenges in its U.S. operations and regulatory hurdles. Provisions for bad loans rose sharply almost across the board, although CIBC did reduce PCLs by around 22%. Caution still remains top of mind amid slowing growth.

Implications for Mortgages and Housing

As mortgage renewals loom in 2025-2026, competition among banks is expected to intensify. With fixed-rate borrowers seeking lower payments, banks may engage in aggressive rate cuts to retain customers. This could reignite Canada’s housing market, albeit with risks tied to rising delinquencies in an uncertain economy.

Challenges Ahead for Banking Sector

Loan growth remains muted, and analysts expect only modest earnings growth in 2025. Falling interest rates could provide relief, but elevated expenses and loan-loss provisions continue to weigh on profitability.

Canadian Big Bank Earnings Breakdown Highlights

Bank of Nova Scotia (BNS)  

• Earnings Q4 2024: $1.69-billion ($1.22 per share)

• Earnings Q4 2023: $1.35-billion ($0.99 per share)

• Adjusted EPS: $1.57 per share

• Analysts’ Expectations: $1.60 per share (adjusted)

Royal Bank of Canada (RY)

• Earnings Q4 2024: $4.22-billion ($2.91 per share)

• Earnings Q4 2023: $3.94-billion ($2.76 per share)

• Adjusted EPS: $3.07 per share

• Analysts’ Expectations: $2.99 per share (adjusted)

National Bank of Canada (NA)

• Earnings Q4 2024: $955-million ($2.66 per share)

• Earnings Q4 2023: $751-million ($2.09 per share)

• Adjusted EPS: $2.58 per share

• Analysts’ Expectations: $2.57 per share (adjusted)

Bank of Montreal (BMO)

• Earnings Q4 2024: $2.3-billion ($2.94 per share)

• Earnings Q4 2023: $1.71-billion ($2.19 per share)

• Adjusted EPS: $1.90 per share

• Analysts’ Expectations: $2.41 per share (adjusted)

Canadian Imperial Bank of Commerce (CM) 

• Earnings Q4 2024: $1.88-billion ($1.90 per share)

• Earnings Q4 2023: $1.49-billion ($1.53 per share)

• Adjusted EPS: $1.91 per share

• Analysts’ Expectations: $1.79 per share (adjusted)

Toronto-Dominion Bank (TD)

• Earnings Q4 2024: $3.6-billion ($1.97 per share)

• Earnings Q4 2023: $2.87-billion ($1.48 per share)

• Adjusted EPS: $1.72 per share

• Analysts’ Expectations: $1.82 per share (adjusted)

Read the Full Story Here.

OTHER NEWS FROM THE PAST WEEK

Purolator, UPS Pause Shipments Amid Backlogs
Major delivery services Purolator and UPS have paused shipments due to a backlog caused by the Canada Post strike. Businesses and consumers are bracing for delays during the busy holiday season.

U.S. Appeals Court Upholds TikTok Ban
The U.S. appeals court reinforced a ban on TikTok over national security concerns, paving the way for stricter measures against Chinese apps. The decision could escalate tensions between the U.S. and China.

Small Business Owners Scramble Over Tariff Fears
Trump’s proposed tariffs have small-business owners strategizing to protect their supply chains and margins. Import-dependent businesses are particularly vulnerable, with many turning to alternative suppliers.

Reevaluating the 60/40 Portfolio: BlackRock Insights
BlackRock suggests investors reconsider the traditional 60/40 portfolio allocation, as interest rate changes and inflation trends are reshaping investment strategies heading into 2025.

Ticketmaster Lawsuit Settlement Credits Expected
Consumers who faced hidden fees on Ticketmaster purchases can expect settlement credits in 2025 following a major lawsuit. The company aims to rebuild trust after years of fee-related controversies.

Mexico Pushes to Preserve Trade Deal with US, Canada
Mexico is taking steps to protect the USMCA agreement amid trade uncertainties. Officials emphasize the importance of stable relations with its North American partners as disputes arise.

Health Insurer Stocks Drop Amid Executive’s Murder
Shares of UnitedHealth and other insurers fell after the tragic murder of a UnitedHealth executive. The incident raised concerns about potential internal security lapses in the industry.

Wall Street Spends Big on CEO Security
From Berkshire Hathaway to Blackstone, top firms are allocating millions to protect CEOs amid rising public scrutiny and targeted threats. Spending on private security has reached record highs.

Market Movers

Top 10 Weekly Gainers

Top 10 Weekly Losers

10 Most Overbought Stocks

10 Most Oversold Stocks

The Relative Strength Indicator (RSI) can provide a signal that suggest 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.

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