Here are five things you need to know this morning:
A cut is coming: There may not be a lot of intrigue around what the Bank of Canada is going to announce this morning (spoiler alert: they’re going to cut rates) but it will be nonetheless interesting to parse the central bank’s policy statement and listen attentively to their accompanying press conference to try to glean just how far along we are in the current cutting cycle. A 25-point cut of the benchmark rate to 4.25 per cent is fully priced in and there’s a non-zero chance of something bigger, although the bar would be high to 50 or more points since it’s a clear signal the bank thinks its policy may be slipping behind. Investors are currently expecting the bank’s rate to come down two more times this calendar year to finish 2024 at 3.75 per cent, followed by three more ticks before next summer. But a lot will depend on what the U.S. Federal Reserve does once it finally steps off the sidelines as soon as later this month. “There’s a growing narrative that it’s too little too late and there’s a bit of catch up to be played,” said Kash Pashootan, the CEO of First Avenue Investment Counsel, on BNN Bloomberg’s The Street this morning. Pashootan said he’s of the view that the Bank of Canada is going to be a little more aggressive than they have been so far on the way down, as the economy is softening. “They’re doing the best that they can,” he said, “but it’s about how fast … they’re going to cut.”
Nvidia clobbered by AI doubts and anti-trust probe: Shares in chipmaker Nvidia saw a record-setting rout yesterday, losing US$279 billion in value in a single trading day. That’s a worse day in market cap terms than any other U.S. company has seen, ever. The catalyst seems to have been analysts at J. P. Morgan and BlackRock singing from the same songbook, warning that the hype over artificial intelligence has gotten so great that the financial payoff can’t possibly live up to it, at least in the short term. All 30 members of the Philadelphia Semiconductor Interest lost at least five per cent, with Nvidia seeing a drop almost twice that size. And that all happened before the stock lost another two per cent after the bell following news that the U.S. Department of Justice has subpoenaed the company, alleging violations of anti-trust laws. Regulators allege the company makes it difficult for its customers to switch to other suppliers and penalizes those who don’t exclusively use its products. By some estimates, Nvidia makes roughly 90 per cent of the semiconductors that are used in artificial intelligence applications. Nvidia says its dominance is due to the quality of its products, and says its customers are free to use whatever chips they want.
CWB shareholders sign off on National Bank takeover: The deal still faces numerous hurdles before it gets to the finish line, but Canadian Western Bank shareholders have given their OK to the proposed buyout by National Bank. More than 99.78 per cent of shareholders signed off on the deal that’s expected to be completed sometime next year, all being well. It’s perhaps no surprise that the vote tally was well in excess of the two-thirds required, since the price National offered to pay was more than twice what the shares were trading at before the offer. But it’s an incremental update on a merger that could reshape the staid world of Canadian banking, making Quebec-based National a much bigger player in the Alberta and British Columbia markets, where CWB is currently a factor.
Dollar Tree slashes outlook on weak consumer demand: Shares in U.S. discount retailer Dollar Tree are one to watch today as the chain lowered its guidance for the fiscal year. The company announced that shoppers are spending less money in their stores than they used to. Same-store sales only grew by 0.7 per cent. At the Family Dollar chain the company also owns, sales actually contracted by 0.1 per cent. Dollar Tree shares are down 12 per cent in premarket trading this morning, bringing the year-to-date tally to a 43 per cent decline.
Couche-Tard to reveal results after the bell: A stock to watch in Canada today will be TSX-listed convenience store giant Alimentation Couche-Tard, which is set to post its quarterly numbers after markets close this afternoon. The chain is in the midst of trying to buy Japanese convenience store giant 7-Eleven but is so far being rebuffed in its efforts. Couche-Tard is reportedly seeking help from big Canadian pension plans to get the financial muscle it will need to finance the multi-billion-dollar takeover.
