Job growth disappoints, Broadcom surges, The Gap beats, notable calls
The daily In the Money newsletter will be on hiatus next week for March Break, but there will still be new episodes of the podcast! This coincides with the time change Sunday. Most of you will lose an hour. Parents of young children, however, will gain an hour. 6am wakeups will become 7am wakeups and sets off a race to adjust faster than your kids in the hopes of one day opening your eyes before they do.
In case you missed the latest episode of In the Money with Amber Kanwar featuring David Burrows of Barometer Capital, you can watch here. We talked about a massive shift taking place in markets and stocks best positioned to take advantage.
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Stall: Canada added the fewest number of jobs since July 2024 in a sign that job growth is stalling. The economy added just 1,100 new jobs in February against the expectation for 20,000 new jobs. The details are not great. There was a big drop in full-time employment (-20,000) and a surge in part-time (+20,000). While private sector jobs increased (+10,000), there was still healthy growth in public sector (+7,600). “Given the stall in hiring during February, and ongoing uncertainty regarding tariffs that is likely to have larger negative impacts ahead, we continue to expect a 25bp cut from the Bank of Canada next week,” wrote CIBC’s Andrew Grantham.
Want help: Job growth in the United States also disappointed. The US economy added just 151,000 jobs vs the 160,000 expected and the unemployment rate ticked up to 4.1%. Futures are in “bad news is good news mode” with equity futures slightly higher after the payroll miss. This afternoon we will hear from Jerome Powell, Chair of the Federal Reserve, who will put the central bank’s spin on what tariffs, tepid job growth and rising inflation mean for central bank policy. Yesterday, the S&P 500 put in its worst performance of the year for the second time this week despite an announcement that tariffs on certain Canadian and Mexican goods would be delayed. While tariffs are meant to inflict pain on trading partners, the pain is showing up most acutely in US stocks. They are among the worst performing major markets in the world so far this year. European markets, emerging markets and even the Canadian markets have all performed better. Maybe someone should show US President Donald Trump the chart below:
Spreading good cheer: Shares of Broadcom are rallying and helping the broad tech sector this morning. The semiconductor company reported better than expected data and infrastructure revenue (+77%) as demand for its custom AI chips continues to benefit from spending plans from the likes of Google, Meta and OpenAI. Their outlook also came in better than expected. It’s sending a wave of relief for investors as the sector has been beaten up lately. Broadcom shares are down 30% from their December peak while Nvidia is down more than 25% from its peak. Even with the decline, Raymond James says they wouldn’t chase the stock here. “…At 29x (next 12 months) P/E, the stock is trading at a 19% premium to NVDA,” wrote Sirini Pajjuri, “Export controls present another potential risk although management doesn’t seem overly concerned.” He prefers Nvidia, Marvell and AMD when it comes to AI chip plays. Broadcom as was asked abut reports they are interested in buying parts of Intel. The CEO said they are not considering M&A at this point. Intel shares are down about 1% in the pre-market.
Gapping up: Shares of The Gap are surging in the pre-market and bucking an ugly trend in retail earning season this quarter. The retailer smashed sales growth expectations at its namesake brand (+7% vs the expectation for just 1.7% growth). The forecast for sales is calling for just 2% growth this year. While the growth forecast is tepid it is better than the drop in sales the company put up last year. The results are a feather in the cap of CEO Richard Dickson who said the progress is real when it comes to turnaround efforts.
Notable calls: Shares of Aecon could come under pressure this morning after the construction company missed profit expectations due to issues with its legacy projects prompting Stifel to downgrade the stock to hold. The company also warned that tariffs would have some impact on the business by potentially increasing input costs and delaying timelines. “Aecon’s margin recovery is progressing slower than we previously anticipated, and we believe a normalized margin of 8.5% is now pushed to the right and will not be achieved in 2026E….We believe the stock performance likely will remain sideways for the next 9-12 month given the lack of catalysts,” wrote Ian Gillies of Stifel. A couple of bulls are throwing in the towel on South Bow after the pipeline operator warned tariffs would hurt its marketing segment. Wolfe Research and CIBC are both downgrading on the back of this. Canadian Natural Resources has a new bull, Evercore is upgrading the stock to buy in an emphatic note titled “Opportunity to Buy (add) one of the enduring franchises in Global Energy.” The upgrade comes down to the fact the stock has underperformed while the operations of the business have outperformed. Price target is $58/share and implies 45% upside.
Don’t miss a very special episode of In the Money with Amber Kanwar on Tuesday. Investing in handbags! We talk about about buying designer handbags like we talk about buying stocks. Which bags are buy and hold? Which appreciate in value? Which should you never buy in-store? That’s right ladies, buying a handbag is an investment! You can thank me later.
