A survey of North American markets heading in both directions
On the rise
Toronto-Dominion Bank (TD-T) rose 2.4 per cent on Thursday after it named a new chief executive, with Raymond Chun succeeding Bharat Masrani.
Currently the head of Canadian personal and commercial banking, Mr. Chun will become chief operating officer effective Nov. 1 and then take over as CEO at TD’s next annual general meeting in the spring.
Canadian bank CEOs tend to retire after a decade and Mr. Masrani has been CEO for 10 years. However, TD has also been embroiled in a major money laundering scandal in the United States, recently setting aside US$3-billion to cover financial penalties.
Mr. Chun’s current division dominates TD’s profits, but he has only run Canadian personal and commercial banking for nine months. He took over the unit in December after the previous division head Michael Rhodes left TD for a different job in the United States. Mr. Chun previously ran wealth management and insurance at TD and he has been with the bank for 32 years.
TD Bank is also shuffling its executive suite. TD veteran Riaz Ahmed, who runs TD Securities, is also retiring early next year and will be succeeded by Tim Wiggan, who currently runs wealth management.
- Tim Kiladze
Bank of Nova Scotia (BNS-T) was also higher by 0.8 per cent in the wake of saying it’s appointed Jean-Francois Courville to a new role as president of the bank’s Quebec operations.
The bank says the new role is designed to support its strategy to grow in the province of Quebec.
Head of Canadian banking Aris Bogdaneris says Mr. Courville’s wide-ranging experience and knowledge make him uniquely positioned to support the bank’s strategy.
Mr. Bogdaneris says Mr. Courville will lead the team in identifying growth opportunities and building new relationships in Quebec.
Scotiabank says Mr. Courville joins the bank from financial services and technology company Purpose Unlimited.
He previously held roles at Wealthsimple, RBC Wealth Management and Manulife Asset Management.
Crypto shares, including Bitfarms Ltd. (BITF-T), Hut 8 Corp. (HUT-T) and Hive Digital Technologies Ltd. (HIVE-X), jumped on Thursday after a half-percentage point interest rate cut south of the border sparked a flight into risky assets, adding to the momentum of an industry that has already secured some big wins this year.
The move could revive interest in bitcoin, the most popular cryptocurrency, which often sways the entire sector as investors chase higher returns and dump safe-havens.
The currency gained 4.5 per cent and was last trading at US$62,959 on Thursday.
“There’s over $6 trillion in money market funds, soon yielding 50 bps less,” said Matt Mena, crypto research strategist at 21Shares.
“Bitcoin and other digital assets have historically thrived in low-interest-rate environments. This move could signal a return of liquidity, sparking a risk-on sentiment and fueling a sharp rally.”
Cryptocurrency exchange Coinbase Global (COIN-Q) jumped and software firm MicroStrategy (MSTR-Q), one of bitcoin’s biggest corporate backers, also gained.
U.S. exchange-traded funds tracking the price of bitcoin and peer ether received landmark regulatory approvals earlier this year, boosting investor sentiment.
Canada Goose Holdings Inc. (GOOS-T) saw a gain of 1.1 per cent after saying it has signed a deal that will result in the creation of its first eyewear collection.
The deal announced on Thursday by the Toronto-based luxury apparel company comes in the form of an exclusive, long-term global licensing agreement with Marchon Eyewear Inc.
The terms and value of the agreement were not disclosed, but Marchon produces eyewear for brands including Lacoste, Nike, Calvin Klein, Ferragamo, Longchamp and Zeiss.
Marchon plans to roll out both sunglasses and optical wear under the Canada Goose name next spring, starting in North America.
Canada Goose says the eyewear will be sold through optical retailers, department stores, Canada Goose shops and its website.
Canada Goose CEO Dani Reiss told The Canadian Press in August that he envisioned his company eventually expanding into eyewear and luggage.
U.S. bank stocks rose on Thursday, a day after the Federal Reserve cut interest rates by 50 basis points, which is expected to reduce deposit costs and alleviate pressure on borrowers.
Elevated interest rates have weighed on loan growth and consumer spending this year, while also increasing fears of borrowers defaulting on their loans.
After jumbo Fed rate cut, market hopes ride on U.S. soft landing
Commercial real estate loan portfolios have been under immense pressure due to high rates and lack of demand for office spaces, prompting banks to set aside billions as a cushion against delinquencies.
“For banks, particularly those that hold mortgages and auto loans, there may be a benefit to spreads in the near term,” said Charlie Wise, senior vice president and head of global research and consulting at TransUnion.
Wells Fargo (WFC-N) and large-cap bank peers Citigroup (C-N) and Bank of America (BAC-N) also saw significant gains.
JPMorgan (JPM-N), the largest U.S. bank by assets and the sector’s bellwether, was also higher. Investment banks Goldman Sachs (GS-N) and Morgan Stanley (MS-N) were also rising.
Most auto loans and mortgages carry a fixed rate of interest, which means banks will continue to fetch higher yields even after the cut.
Borrowers looking for immediate relief could also refinance their loans and negotiate better repayment terms, lowering the risk of defaults. Top banks echoed the Fed’s move and reduced their prime lending rates on Wednesday, giving consumers an immediate reprieve on borrowing costs.
Regional banks are expected to benefit more from rate cuts, compared with their larger rivals, as elevated deposit costs normalize and the demand for loans recovers.
Shares of major U.S. homebuilders surged on Thursday, buoyed by expectations of higher demand due to reduced borrowing costs after the Federal Reserve unveiled an oversized interest rate cut.
D.R. Horton (DHI-N), Lennar (LEN-N), PulteGroup (PHM-N) and Toll Brothers (TOL-N) rose. Lennar is set to report its quarterly earnings after the bell on Thursday.
Shares of home improvement chains Home Depot (HD-N) and Lowe’s (LOW-N) were also up on Thursday.
The lower cost of financing could also boost further homebuilding activity offsetting a chronic shortage of homes that has been a growing issue since the 2008 financial crisis.
Opinion: Fed sees higher ‘terminal’ rate, reached sooner
The central bank drove up interest rates between 2022 and 2023 to the 5.25-5.50-per-cent range to bring down high inflation, causing a slowdown in the housing market, but mortgage rates have been falling as the Fed telegraphed rate reductions.
Fed rate cuts will likely push mortgage interest rates down and should reduce interest rates on loans for land development and home construction businesses, NAHB Chief Economist Robert Dietz said in a recent report.
“Lowering the cost of construction is critical to confront persistent challenges for housing affordability.”
Homebuilder stocks have rallied recently with the S&P 500 Homebuilding Index gaining more than 30 per cent so far this year compared to a 17-per-cent rise in the S&P 500 Index, pricing in expectations of further rate cuts and the corresponding easing in mortgage rates.
Olive Garden-owner Darden Restaurants (DRI-N) said on Thursday it has entered into a delivery deal with Uber Technologies, sending its shares up.
The partnership is set to kick off as a pilot program at some Olive Garden locations in the United States in late 2024 and expand to all 900 outlets across the country by May 2025 after a successful trial, Darden said, without giving other details.
“Guests have been asking us for home delivery options and they continue to show they are willing to pay for the convenience,” CEO Rick Cardenas said, adding the deal would help address customer needs without compromising on competitive advantages.
Darden missed its first-quarter sales and profit estimates on Thursday, hurt by sequential decline in customer traffic amid sticky inflation.
The restaurant operator, which also owns LongHorn Steakhouse, posted a 1.1-per-cent drop in same-store sales in the quarter ended Aug. 25, compared with a 5% rise a year ago, as customers cut back on dining out.
The restaurant industry has been struggling with dwindling demand as inflation-weary consumers became cautious of their expenses and have been increasingly eating at home.
“The significant step down in traffic during July, led to our first quarter earnings being lower than expected,” said CFO Raj Vennam, as the company reiterated its annual forecasts.
Same-store sales at its Olive Garden business fell 2.9 per cent, while they fell 6 per cent in its fine dining restaurants.
Darden reported an adjusted profit of US$1.75 per share for first quarter, below analysts’ average estimate of US$1.83 per share, according to LSEG data.
The company posted quarterly net sales of US$2.76-billion, compared with estimates of US$2.80-billion.
U.S.-listed shares of Chinese technology company Alibaba (BABA-N) gained ground after it released new open-source artificial intelligence models and text-to-video AI technology, intensifying its efforts to compete in the booming area of generative AI.
The open-source models, numbering more than 100, come from Alibaba’s Qwen 2.5 family, its latest foundational large language model released in May.
Chinese technology companies, like their U.S. counterparts, have been investing heavily in generative AI, with firms racing to develop robust product portfolios and diversified offerings.
While competitors such as Baidu and OpenAI have primarily adopted closed-source approaches, Alibaba has embraced a hybrid model, investing in both proprietary and open-source development to broaden its AI product range.
Its new models range from 0.5 to 72 billion parameters - the variables that determine an AI model’s capability and performance - in size, offering proficiency in mathematics, coding, and support for over 29 languages, Alibaba said in a statement.
The models aim to cater to a wide array of AI applications across various sectors including automotive, gaming, and scientific research.
Alibaba on Thursday also unveiled a new text-to-video model as part of its Tongyi Wanxiang image generation family, joining a growing number of Chinese tech firms entering this emerging market.
United States Steel (X-N) forecast third-quarter profit above Wall Street estimates on Thursday, citing resilient domestic demand for flat-rolled steel amid a bottoming steel pricing environment, sending its shares up.
“Challenging pricing dynamics are being offset in part by the benefits of our balanced and diverse order books in the North American Flat-Rolled segment,” said CEO David Burritt.
The sustained deterioration in steel prices is expected to pressure product margins for steelmakers during the quarter against the backdrop of an oversupply condition in the U.S. market.
Earlier this week, peers Steel Dynamics (STLD-Q) and Nucor (NUE-N) posted third-quarter profit views below estimates.
U.S. Steel expects third-quarter adjusted profit to range between 44 US cents and 48 US cents per share, compared with analysts’ average estimate of 39 US cents, according to LSEG data.
The company forecasts quarterly earnings to be sequentially lower at its flat-rolled, mini-mill and tubular product segments on softer selling prices.
However, it expects the European segment to see a sequential rise in third-quarter earnings due to a favorable adjustment for CO2 allowances.
With files from staff and wires