TSX futures rise following rebound recovery on Wall Street

Canadian and U.S. stock index futures climbed, recovering from recent declines, as market optimism for a September Federal Reserve rate cut surged to 90% odds following weak U.S. employment data and renewed tariff threats. This broader sentiment shift is accompanied by mixed corporate results, with Palantir Technologies soaring on strong revenue, while commodities saw varied movements as oil prices fell after OPEC+ agreed to a production hike and gold retreated.

Analysis

North American equity futures are indicating a recovery, with the S&P/TSX 60 futures rising 1.6% and U.S. futures showing modest gains, following a sharp sell-off in the prior week. This rebound is primarily driven by a significant shift in monetary policy expectations, as the market now assigns a 90% probability of a September Federal Reserve rate cut, up from 63% a week ago, according to the CME FedWatch tool. This sentiment was catalyzed by weak U.S. nonfarm payrolls data and renewed trade tensions, including a new U.S. tariff threat against India. On the corporate front, performance is divergent. Palantir Technologies (PLTR) shares surged after reporting its first-ever quarterly revenue above $1 billion, benefiting from government AI initiatives, while Hims and Hers Health (HIMS) shares fell on a revenue miss. In commodities, crude oil prices continued their decline, with Brent and WTI futures falling over 1.0% after OPEC+ agreed to a 547,000 bpd production hike for September, raising supply-side concerns. Gold has retreated slightly after a three-day rally but remains underpinned by the same rate-cut expectations influencing equities.

Key Decisions for Investors

• Given the market's heavy reliance on Fed rate cut expectations, closely monitor the upcoming ISM non-manufacturing PMI, as a reading significantly different from the 51.5 forecast could disrupt the current rally.
• Investors should selectively focus on companies with strong fundamental tailwinds, such as Palantir (PLTR) in the AI sector, as the miss from Hims and Hers (HIMS) indicates that positive market sentiment is not lifting all stocks.
• Caution is warranted in the energy sector due to the OPEC+ production increase contributing to oil price weakness, while gold's consolidation suggests it remains a relevant hedge against potential economic disappointments or escalating trade tensions.
• Anticipate potential market volatility around upcoming earnings reports from bellwethers like Disney (DIS), Caterpillar (CAT), and Uber (UBER), which will provide a clearer picture of corporate health beyond macro sentiment.