Futures higher, defense higher, Intel higher, crypto pumps, Air Canada cut
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Dip buyers: Futures are looking to add to the strong gains from Friday despite tariffs on Canadian and Mexican goods set to go into effect tomorrow. I don’t see any terribly convincing reasons for the enthusiasm other than there was a nearly 5% pullback in the S&P 500 and dip buyers felt that was overdone. Still, the make up of the market rally looks awfully defensive. Gold, utilities and telecoms were the best performing sector in February on the TSX. While consumer staples, real estate and utilities were the star performers on the S&P 500. Tech stocks are in last place with the Mag 7 becoming the lag 7, down nearly 9% for February. This week we will get a read of the US consumer with earnings from Costco, Target and Macy’s in the US. This comes as we saw a lackluster start to the year in US retail sales data. “Raising eyebrows, the Atlanta Fed’s Q1 GDP Nowcast estimate plummeted to -1.5% annualized,” wrote BMO’s Sal Guateri, “though it almost certainly overstates the economy’s weakness.” There is also jobs data on both sides of the border on Friday. We will hear from Fed Chair Jerome Powell in a speech on Friday as well. Tomorrow, US President Trump will address a joint session of congress for the first time in his second presidency. Buckle up.
De-fense! De-fense! De-fense!: Defense stocks are surging in Europe as it is clear that Europe will need to invest in the sector because it may not be able to rely on US strength. I’ll trust that we’ve all seen that press conference between Trump, US Vice-President JD Vance and Ukrainian President Volodymyr Zelenskyy. If you haven’t, let’s just say it went off the rails. Aerospace/defense stocks are surging as investors anticipate higher defense budgets throughout Europe (Airbus, BAE Systems, Dassault Aviation, Leonardo, Rheinmetall, Rolls Royce, Saab, and Safran are among the top stocks in Europe).
411: Intel shares are popping 6% in the pre-market on reports that Nvidia and Broadcom are running tests on its 18A manufacturing process. Turning Nvidia and Broadcom, two of the hottest AI chip makers, into customers would be a coup for the embattled Intel which has seemingly missed out on the AI party. These are just initial reports and all they are doing is testing the platform, they haven’t signed on as customers yet. Intel (-45%) has badly underperformed Broadcom (+45%) and Nvidia (+52%) over the past year. Having said that, it is the best performing chip stock in 2025 as the company looks to get its rear in gear. Shout out to Mark Sebastian who joined us a month ago to tout Intel as a buy.
Pump: Crypto prices are pumping after Trump posted on Sunday about a US crypto reserve that would include Ripple (+20%), Solana (+16%) and Cardano (+50%) in addition to Bitcoin and Ethereum. He said the moves will ensure the US is the “Crypto Capital of the World.” The post was light on new details but was enough to move the needle, with smaller digital assets like Cardano surging more than 100% after the post. Bitcoin is back above $90,000 after dropping below $80,000 last week. A bunch of crypto exposed companies like Coinbase, MicroStrategy and Robinhood are also trading up in the pre-market.
Wings clipped: Air Canada was downgraded to hold at JPMorgan on multiple headwinds. Fuel prices have been “uncooperative”, the weaker Canadian dollar and a political backdrop that is reducing Canadian appetite for US travel are all reasons for the downgrade this morning. “This is on top of the fact that the Canadian fundamental construct isn’t as intriguing as that in the U.S. in the first place,” wrote Jamie Baker of JPMorgan. While he downgraded the stock and cut the price target, at $24/share it is still 43% higher than where the stock currently trades. Jamie Murray of the Murray Wealth group is still a buyer and says that Canada’s problems have unjustifiably become Air Canada’s problems. His bull case captures much of the sentiment in JPMorgan’s note.
