Bank of Canada day, Fed day, big tech earnings day, ASML pops, Starbucks relief
Feeling a bit like Carrie Bradshaw this morning. Sitting at my pink laptop, enjoying a warm cup of tea, looking out onto a snowy city. What would Carrie say about the markets? “I couldn’t help but wonder, was the market having a full-blown existential crisis, or was it just me?”
If you missed Ivana Delevska of Spear Invest on the podcast, you can watch the full interview here. She called for buying the dips right out of the gate, which has proven to be successful after the sell-off. Listen to find out what she’s buying and avoiding on the DeepSeek market freak.
Synonym for huge: Look up huge in the dictionary and you might find a picture of today’s calendar of events. We’ve got Bank of Canada rate decision this morning, Fed rate decision this afternoon and three magnificent 7 companies reporting after the bell (Meta, Microsoft, Tesla). Futures are subdued after a big recovery day for AI stocks, led by Nvidia which rallied nearly 9%. However, it remains 8% lower from its December high. The Federal Reserve is expected to keep rates unchanged after cutting rates at three consecutive meetings. The real fireworks will come during the press conference. Expect a lot of questions about tariffs and how the central bank could react to them. Recall, the last Fed decision in December sparked a nearly 3% sell-off in the S&P 500. So, stay nimble.
Rate expectations: The Bank of Canada is expected to cut interest rates by 25 basis points at 9:45amET. The big question is will they continue cutting from here? Certainly the resilient job market, the weaker Canadian dollar, and recent tax holiday suggest the Bank of Canada shouldn’t be aggressive when it comes to the path of rate cuts. Not to mention, the risk of tariffs which could dent the economy but also increase inflation. One thing to look out for in today’s Monetary Policy Report is an update on how Canadian rate policy could change under different tariff scenarios. Scotia’s Derek Holt notes that tariffs change the de-facto easing trajectory of the markets. Specifically, if Canada were to retaliate on tariffs, interest rates could actually increase to combat the inflation it would cause.
Caffeine high: Starbucks is up 3% in the pre-market after sales didn’t fall as much expected in the quarter. While sales fell for a fourth quarter in a row dropping 4%, it wasn’t as bad as the 5.5% decline expected by Wall Street analysts. Stocks that have been beaten up can rally on less bad news than anticipated. Starbucks is in the midst of a turnaround. Bank of America says they think the company will continue to benefit from new initiatives under the “Back to Starbucks” plan. These include things like putting cream and milk back on the counters, removing the extra charge for non-dairy items, focusing more on coffee, and pairing back its food offerings. Stifel is optimistic these efforts will pay off and says the company could start growing sales again as early as next quarter.
AMA ASML: Shares of ASML are up 5% in the pre-market after bookings came in much higher than expected, creating a relief rally in a stock crushed by the DeepSeek market freak. ASML is a Dutch company that makes components for semiconductor companies. It fell 16% on concerns DeepSeek would dampen demand for chips. Sales and profit came in better than expected, but the fact that bookings (a forward looking indicator) was double the expectations is supporting a wash of relief for investors who are worried about demand. Tonight’s earnings from Microsoft and Meta will be key for the whole sector because their spending plans on AI are what supports semiconductors.
Membership has its perks: Shares of Soho House are surging after known activist investor Dan Loeb of Third Point revealed he had a stake. This stock is interesting because back in December, a third party offered to buy the company at a more than 80% premium. The deal was supported by the Executive Chair and controlling shareholder. However, the stock continued to trade at a discount to the offer price of $9.00/share. Loeb criticized the handling of the sale process and said the current deal fails to maximize shareholder value. He wants the Board to consider opening up the sales process to other bidders. So there could be more upside from here, however, as I said the market still hasn’t valued the stock as high as the current offer on the table. Soho House IPO’ed during the 2021 hey day and hasn’t been able to reclaim its highs of $12-14/share.
