Stocks Climb on Strong Bank Earnings, Surprise ADP Payrolls Drop

Building on yesterday’s US index gains of 0.2%-0.4%, US index futures are up 0.2%-0.3% this morning. European trading is quiet with the DAX up 0.1% and the FTSE down 0.1%.

US ADP payrolls declined and disappointed (-32K vs Street 5K and previous 47K) as small businesses cut jobs last month. Investors appear to be taking this as adding to the case for a Fed interest rate cut this month. The US Dollar is selling off on the news, sparking rallies in other currencies, including gains of 2.2% for Bitcoin, 1.2% for Silver, 0.8% for Gold, 0.3% for the Euro, and 0.2% for the Loonie. Commodities are also rallying today with Crude Oil up 1.2% and Copper up 2.8%.

Today’s Canadian bank earnings have come in strong with Royal Bank ($3.85 vs Street $3.55, 6.5% dividend increase, up 2.3% premarket), and National Bank ($2.82 vs Street $2.62, 5.1% dividend increase). Both banks indicated wealth management and capital markets drove growth, helped by traditional banking. RBC increased its loan loss provision by 20% from a year ago to $1.01B.  Bank earnings continue tomorrow with results due from BMO, TD, and CIBC*. 

Retailer Macy’s posted a surprise profit this quarter ($0.09 vs Street -$0.13) and raised sales guidance for the year. Its shares are down 7.0% in premarket trading after management indicated consumer holiday spending has become more selective and tariffs have added to costs.

*Shares of CIBC are held in some portfolios managed by SIA Wealth Management.

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