Market Recap: U.S. and Canada

The markets had an extremely volatile but ultimately positive week, with a sharp midweek selloff giving way to a strong recovery into Friday's close. The Nasdaq 100 led the charge, spending much of the early week well ahead of the pack before pulling back hard around June 9th and 10th, then clawing its way back into positive territory. The TSX showed impressive resilience through the choppiness, and finished near the top of the leaderboard.

As for the numbers, the Nasdaq 100 led all major indices with a gain of 2.34%, followed by the TSX at 1.62%. The Dow Jones and S&P 500 finished close together, up 0.66% and 0.65% respectively.

Major Economic Stories This Week

Bank Of Canada Holds Again, But The Language Has Shifted

The Bank of Canada left its overnight rate at 2.25% for a fifth consecutive meeting, with policymakers signalling they will not allow energy-driven inflation to become entrenched.

The hold was widely expected, but the statement around it carried more weight than the decision itself. Policymakers acknowledged that inflation in Canada rose to 2.8% in April, driven largely by energy prices tied to the Middle East conflict, while core inflation actually moved lower to 2.1%. That split tells an important story: the headline number is being pushed around by external forces, not by domestic demand running hot. The Bank is threading a needle here, holding rates steady while signalling it will act if energy price effects begin bleeding into broader price-setting behaviour. With economic activity described as weak and US trade policy uncertainty still unresolved, the Bank has little incentive to move in either direction right now.

• Bank Rate: 2.50%; deposit rate: 2.20%

• Core inflation at 2.1%, moving in the right direction while headline sits 70 basis points higher

• Inflation forecast: expected to hover near 3% before gradually easing toward the 2% target

• US trade policy uncertainty explicitly cited alongside weak domestic activity as key risk factors

US Inflation Hits A Three-Year High On Energy Shock

Annual CPI rose to 4.2% in May, the highest reading since April 2023, with energy costs up 23.5% and gasoline prices soaring 40.5%.

This is the third consecutive monthly acceleration in headline inflation, and the driver is almost entirely energy. Gasoline prices are up more than 40% year-over-year, fuel oil has climbed nearly 59%, and together those two categories account for the bulk of the headline move. What makes this print worth reading carefully is what it does not show: core inflation rose just 0.2% month-over-month in May, down from 0.4% in April, and came in slightly below forecasts. That monthly deceleration in core is a significant data point. Shelter and food are still adding pressure annually, but the underlying domestic inflation trend is not re-accelerating. So we’re seeing an external energy shock layered on top of a relatively contained core, and the Fed's response will depend heavily on how long that energy shock persists.

• Fuel oil: +58.9% annually, up from 54.3% in April, accelerating alongside gasoline

• Food inflation: +3.1% annually, up from 2.3% in April, a big step higher

• Core CPI monthly pace: +0.2% in May, slowing from +0.4% in April, came in below forecasts of 0.3%

• Shelter: +3.4% annually, edging higher from 3.3% in April, still providing upward pressure

Producer Prices Signal More Pipeline Pressure Ahead

US producer prices rose 1.1% in May for the second straight month, with annual PPI climbing to 6.5%, the highest reading since November 2022.

When producer prices are running at 6.5% annually, we need to understand what that means for the months ahead. Goods prices jumped 2.8% on the month, with gasoline again leading the way at 23.4%, but diesel, jet fuel, industrial chemicals, and natural gas liquids all contributed as well. The energy story driving headline consumer inflation is running even hotter at the producer level. Services PPI cooled to 0.3% monthly from 0.7% in April, which is a modest positive, but it doesn’t offset the pressure building in goods. Core PPI came in below forecasts on both a monthly and annual basis, which is a small sign that underlying pipeline pressure isn’t accelerating as fast as the headline suggests. With goods inflation this elevated at the producer level, some pass-through to consumers in the coming months is a reasonable expectation.

• Pork prices: -10.1% on the month, one of the few notable deflationary categories in the goods breakdown

• Machinery and equipment wholesaling margins: -1.9%; fuels and lubricants retailing also declined

• Core PPI: +0.4% monthly vs. forecast of 0.5%; +4.9% annually vs. forecast of 5.4%, both below expectations

• Portfolio management services: +4.8% monthly, accounting for over 40% of the services PPI gain

TOP INSIGHTS

Energy Is The Economy's Wildcard Right Now, On Both Sides Of The Border

The inflation data this week tells a remarkably consistent story: energy is doing almost all the damage. In the US, gasoline alone accounted for a massive share of both the CPI and PPI monthly gains. In Canada, the Bank of Canada held rates precisely because policymakers could see that the headline inflation move was energy-driven, not broad-based. That distinction matters enormously for how central banks respond.

What this means practically is that households are being squeezed at the pump and on utility bills while the underlying economy isn't generating the kind of wage-price spiral that would justify aggressive rate hikes. That's a different problem than 2022, and it calls for a different response. The risk is that energy prices stay elevated long enough to bleed into expectations, which is exactly what both the Fed and the Bank of Canada are trying to prevent.

I think the next two months are critical. If energy prices stabilize or pull back as Middle East tensions ease, both central banks have room to breathe. If they don't, the pressure to act will build fast. I'm watching the monthly core readings closely, because as long as those stay contained, the broader inflation story will be manageable.

The Fed Is Caught Between A Rock And A Hard Place

The US core inflation rate hitting 2.9% while the monthly pace actually slowed to 0.2% is the kind of mixed signal that makes the Fed's job genuinely difficult. The annual rate is moving in the wrong direction, but the monthly trend is cooling. Those two things can both be true at the same time, and right now they are.

For households, the actual real-life experience is unambiguous: things are getting more expensive. Shelter, transportation, apparel, food, the categories that make up everyday life are all running hot. The fact that used cars and some medical commodities declined doesn't offset what people are feeling at the grocery store and the gas station. Consumer sentiment is going to reflect that reality regardless of what the data says about monthly trends.

Here's what I'm watching: the Fed can't cut with headline inflation at 4.2% and PPI running at 6.5% annually. But it also can't hike aggressively into a weakening economy without risking something breaking. That leaves them on hold, likely through the summer, hoping energy prices do the work for them. It's not a comfortable position, and markets know it.

The Bank Of Canada Has More Flexibility Than The Fed, But Not Unlimited

Five consecutive holds at 2.25% might look like inaction, but the Bank of Canada's position is actually more defensible than it appears. Core inflation at 2.1% gives them cover to stay put while the energy shock works through the system. The Fed doesn't have that luxury right now, with core running at 2.9% and producer prices signalling more pipeline pressure to come.

That divergence has real implications for Canadian households and businesses. A Bank of Canada that stays on hold while the Fed remains frozen means the interest rate environment stays stable here, which is a big deal for mortgage holders and anyone carrying variable rate debt. The bigger risk for Canada isn't inflation, it's the weak economic activity the Bank itself flagged, compounded by ongoing uncertainty around US trade policy.

I think the Bank holds at least one more time, possibly two, before reassessing. If energy prices ease and core stays near 2%, there's actually a credible case for a cut later in the year. That's not the consensus view right now, but the data supports at least having that conversation.

TOP STORY
SpaceX Makes History With The Largest IPO Ever

• SpaceX soared to a $2 trillion valuation on Nasdaq debut

• Musk becomes the world's first trillionaire following the listing

• IPO proceeds of $75 billion more than doubled Saudi Aramco's record

• Fast-track Nasdaq 100 inclusion expected within 15 trading days

SpaceX's Nasdaq debut on Friday was unlike anything Wall Street has seen before. Shares closed up 19% at around $161, capping a session that saw more than 500 million shares trade hands and roughly $80 billion in volume. The listing raised $75 billion, more than double the previous record set by Saudi Aramco in 2019, and pushed SpaceX's market cap past $2 trillion, making it the sixth-largest company in the US.

The Valuation Question Nobody Can Fully Answer

With 2025 revenues of $18.7 billion, SpaceX is trading at a price-to-revenue ratio of roughly 110, a number that sits well above every other mega-cap stock on the market. Morningstar pegged fair value closer to $780 billion. But, as is usually the case with a Musk company, investors are buying this on trajectory and optimism, not fundamentals. SpaceX controls more than four-fifths of mass launched into orbit over the past three years, Starlink provides a recurring revenue base, and the company has positioned its AI ambitions as the next leg of growth. Some analysts are already drawing comparisons to Amazon's early years, when the valuation looked disconnected from reality right up until it didn’t.

Passive Funds Are About To Be Forced Buyers

Under Nasdaq's fast-entry rules, SpaceX could be added to the Nasdaq 100 in as few as 15 trading days. That inclusion will make it an automatic holding for every passive fund and ETF tracking the index, and that will create a fresh and largely inelastic source of demand for the shares. It’s also worth watching for the rotation effect; some analysts expect funds to trim existing technology holdings to make room, and that could create selling pressure on other large-cap names in the weeks ahead.

Read the full story here.

The SpaceX IPO was the kind of market event that commands a lot of interest and attention. With shares closing up 19% on debut day and a valuation that has already drawn comparisons to Amazon's early years, the question of whether to buy, wait, or walk away entirely is one that reasonable people are answering very differently right now. I'm curious to learn what our community does when faced with a high-conviction, high-valuation opportunity like this one.

LAST WEEK’S POLL RESULTS

In last week's poll, I asked how Canada should respond to the new US forced labour tariff threat. A strong majority, 68%, said Canada should pursue other trading partners, while 26% favoured negotiating quietly and just 6% supported pushing back publicly. The results point to a clear appetite in this community for diversification over confrontation. Thanks to everyone who voted.

READER COMMENTS

Pursue Other Trading Partners

"...pursue new trading partners and negotiate quietly. No need to make a public fuss and get Trump all angry at 2:30 AM." — mrrobpog

"Go Carney" — robobrien

"I chose 'pursue other trading partners...', but think 'push back publicly' should be in Carney's/Canada's response plan as well.
The current POTUS loves being the bully and I think Canada saying "we don't need you" equates to a metaphorical punch in the nose. While I'm not a violent guy by nature, bullies need to be dealt with IMO, especially one's as morally corrupt as this POTUS.
Just so anyone reading this knows exactly where I'm coming from... I'm born, bread & have lived my 5+ decades in the U.S.. With that said, I'm 100% rooting for Canada as it relates to this administration's renewed tariff threats." — callawayguy

Negotiate Quietly

"It be better to have other trading partners but the Canadian infrastructure isn’t build for it. So better to make a good deal with the USA since they are our big partners and closest neighbour. On top this is Trump tactic to get a good deal" — angellodarko

"Like it or not, the US is always going to be Canada's number 1 trading partner. Yes, Canada should pursue other trading partners to reduce our reliance on the US. But this will take years.... Escalating the situation is not going to help." — mrzarowny

ARTIFICIAL INTELLIGENCE

Anthropic's Most Advanced Models Go Dark Overnight

• US government cites national security in ordering the shutdown

• Anthropic disputes that a narrow jailbreak warrants a full recall

• The order marks a major shift from chip controls to model-level restrictions

• An Anthropic IPO filing last month adds a charged commercial backdrop

Anthropic's two most advanced AI models were pulled offline Friday after the US government issued an export control directive ordering the company to suspend access for all foreign nationals. Anthropic said it had no choice but to disable the models entirely for all customers to ensure compliance, a decision that affected hundreds of millions of users globally.

What The Government Actually Said, And What Anthropic Disputes

The government's concern centres on a potential jailbreak of one model that it believes could allow users to identify software vulnerabilities. Anthropic said it received only verbal evidence of what it characterised as a narrow and non-universal jailbreak, and pushed back firmly on the proportionality of the response. The company argued that if this standard were applied consistently across the industry, it would effectively halt all new frontier model deployments from every major AI provider, and says it’s a direct challenge to the framework regulators are building.

A Bigger Shift Than It Appears

This order represents something new in the AI policy landscape. US export controls have historically targeted the chips and hardware that power AI systems. Restricting access to the models themselves is a different category of intervention entirely, and one with much broader commercial and geopolitical implications. Anthropic had confidentially filed for a US IPO just weeks before the shutdown order arrived, adding a sharp commercial dimension to what is already a fraught regulatory relationship.

Read the full story here.

THE ECONOMY
Why The US Economy Keeps Defying The Odds

• Capital expenditure running at 13.9% of GDP, holding firm under pressure

• The shale revolution has cut oil's contribution to GDP per unit by half

• European reliance on bank financing limits flexibility US companies enjoy

• May job gains of 172,000 came in well ahead of expectations

The US economy has absorbed a remarkable series of shocks over the past few years, sweeping tariffs, mass deportations, and an energy shock tied to Middle East conflict, and kept growing anyway. Fresh inflation data this week showed consumer prices rising at their fastest pace in three years, and that raises a fair question: how much longer can the resilience last?

The Structural Advantages Are Real

Two factors stand out. The first is capital investment. Business capital expenditure is running at 13.9% of US GDP, a level that economists would typically expect to slow under the kind of supply and demand pressures the economy is currently absorbing. It has not slowed. The second is energy. The shale revolution transformed the US from an energy-vulnerable economy into one of the world's largest producers, and it has steadily reduced the economic cost of oil price swings.

Resilience At The Macro Level Can Hide Real Pain Below It

The aggregate numbers look strong, but it doesn’t tell the whole story. Inflation at 4.2% hits hardest for households with the least flexibility; those already stretched by housing costs, food prices, and stagnant wage growth. The US labour market added 172,000 jobs in May, which is a solid number, but job growth alone doesn’t resolve a cost-of-living squeeze that’s been running for several years. The risk economists are watching is not a near-term recession, but rather whether inequality reaches a point where consumer spending, the engine of US growth, starts to crack from the bottom up.

Read the full story here.

PREDICTION MARKETS
Prediction Markets Get A Framework, But Not The Crackdown Critics Wanted

• CFTC proposes rules that leave most sports prediction markets intact

• Injury bets, officiating outcomes, and pitch-type contracts face restrictions

• Critics say the proposal falls far short of meaningful consumer protection

• Kalshi and Polymarket operate as financial markets, not traditional sportsbooks

Regular readers of the Pulse will know my less than enthusiastic opinion of the Prediction Markets.  This week, the Trump administration's new proposed framework for these markets drew immediate reaction from critics. The Commodity Futures Trading Commission unveiled a 267-page proposal that would preserve most sports-related prediction market activity while creating targeted restrictions around categories deemed especially vulnerable to manipulation.

What Gets Restricted, And What Does Not

The proposed rules would limit markets on player injuries, officiating outcomes, pitch-type contracts, player ejections, and any potential future markets on high school sports. Everything else largely stays in place. The minimum age remains at 18, election markets are not being rolled back to Biden-era restrictions, and the broad framework treating these platforms as financial markets rather than gambling operations remains intact. Kalshi and Polymarket, the two dominant players, are structured as futures markets regulated by the CFTC rather than state gaming regulators, and Wednesday's proposal does nothing to change that fundamental structure.

The Industry Has Powerful Enemies And A Friendly Regulator

The American Gaming Association, which represents traditional casinos and sportsbooks, called the proposal a redefinition of sports betting. Several members of Congress want stricter rules, state regulators have argued in court that all sports bets on these platforms should be prohibited, and addiction counsellors have raised concerns about accessibility. The CFTC under chair Mike Selig has taken a notably different view, framing the proposal as enabling responsible innovation. Whatever the final rules look like, a legal challenge is widely expected once they are formalised.

Read the full story here.

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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