Futures higher, Canada scraps digital tax, back half begins, HPE gets green light for Juniper, Disney upgraded to buy
For a look at what to expect in a holiday shortened trading week read my weekly column in The Globe and Mail.
Hitting the high notes: US Futures are surging after Canada dropped its digital services tax that drew the ire of US President Donald Trump. On Friday, Trump posted on social media that talks with Canada are off over the tax. Markets wobbled a bit but the S&P 500 went on to hit a record high for the first time in four months. The digital services tax was a levy on companies like Meta and Alphabet doing business in Canada, the first payments were due to today. With the deal scrapped, trade negotiations are resuming with the goal of a deal by July 21st according to a statement released yesterday from the Department of Finance. The loonie rallied a little after it was released. Expect light trading volumes this week with Canada closed tomorrow for Canada Day and the US closed Friday for Independence Day.
Back nine: Today marks the last day of the first half of the year. US markets wrapped up a quarter which saw a near bear market and an abrupt pivot to one of the most stunning rallies in history. The caveat of course is that valuations are now back to historical highs on the S&P 500. That doesn’t mean things can’t get more expensive, especially if the focus moves from trade wars to tax cuts. The TSX has fared much better so far in 2025 and is up a robust 8%. While we know that gold stocks gave us a head start with a huge rally in Q1, some of the best performers in Q2 were the laggards in Q1. Shares of Celestica, Cameco and NFI Group are some of the best performers in the last three months.
Green light: Hewlett Packard Enterprises is surging 13% in the pre-market after reaching a deal with the Department of Justice that paves the way for its $14 billion acquisition of Juniper Networks. Shares of Juniper are also surging after trading at a discount to the offer price. In order to satisfy the DOJ, which sought to block the transaction, HPE will sell its networking solutions business for small and medium businesses.
Stablecoins 101: BMO is out with a note this morning giving a primer on stablecoins. Readers of the newsletter will know this is the new fascination for crypto curious investors. Stablecoins are cryptocurrencies backed by a stable asset, like the US dollar. The largest issuer of US dollar stablecoins is Circle and is up nearly 500% since it debuted less than a month ago. Shares of Visa and Mastercard took a hit on concerns it would disrupt their dominance in payments. However, part of the BMO note points out that the use of stablecoins is probably going to be higher in business to business transactions where Visa and Mastercard share is low.
Notable calls: Jefferies is upgrading Disney to buy saying earnings are poised to break out. The analyst, James Heaney, says the overhang from the parks is abating while the content slate for the media business looks strong (Zootopia 2 and Avatar 3). Disney shares have had a huge rally from the April lows, but are basically flat over the last 8 months. Goldman is upgrading defense contractor Kratos to buy. Kratos has been on a tear but took a hit last week when it announced it was issuing stock to raise $575 million. That’s a lot of walking around money, but Goldman matched street high targets of $52/share (11% upside from here) and said investors should buy this weakness. It was also a name that JoAnne Feeney of Advisors Capital liked when she was on In the Money with Amber Kanwar last week.
