Market Insights: A Strong Rally, With Room to Breathe

Macroeconomic and Market Developments: 

• North American markets were mixed to down this week. In Canada, the S&P/TSX Composite Index closed -0.72% lower, while in the U.S., the Dow Jones Industrial Average decreased by -0.17% and the S&P 500 Index rose 0.13%.  
• The Canadian Dollar fell this week, closing at 72.64 vs. 73.08 cents USD last week. 
• Oil prices rallied this week, with U.S. West Texas Crude closing at US$101.30 vs. US$94.87 last week. 
• The price of Gold fell this week closing at US$4,457 vs. US$4,725 last week. 
• U.S. retail sales rose 0.5% in April, matching expectations, while prior months were revised higher, suggesting consumer spending remained resilient despite higher inflation. Gains were broad-based, led by gasoline stations and nonstore retailers, though autos, clothing, and furniture declined. However, inflation-adjusted sales are up just 1.1% over the past year and remain below their April 2022 peak, highlighting a softer broader spending backdrop. 
• U.S. inflation remained elevated in April, with the Consumer Price Index rising 0.6%, matching expectations, while year-over-year inflation increased to 3.8%. Energy prices were a major driver, rising 3.8% for the month, while core CPI, which excludes food and energy, rose 0.4%, above expectations, and is now up 2.8% from a year ago. Housing costs remained the main contributor to core inflation, while real average hourly earnings fell 0.5% in April and are down 0.3% over the past year, suggesting wages continue to lose ground to inflation. 
• Agnico Eagle Mines announced plans to invest $14 billion in its Ontario mining assets by 2030, including roughly $2 billion toward the Detour Lake underground expansion and Upper Beaver gold-copper project. The investment is expected to support Agnico’s existing Ontario workforce, create up to 1,600 new jobs, and add nearly $5 billion to provincial GDP, highlighting continued momentum in Canada’s mining sector amid strong gold prices and efforts to streamline mine permitting. 
• Kevin Warsh was confirmed as the next U.S. Federal Reserve Chair in a narrow 54–45 Senate vote, taking over at a challenging time as inflation rose to 3.8% in April amid higher energy costs. While President Trump is pushing for lower interest rates, Warsh has said he will defend the Fed’s independence, highlighting the difficult balance between political pressure, inflation concerns, and monetary policy. 
• The federal and Alberta governments announced a new climate and energy agreement that could support a pathway for a West Coast oil pipeline, with Alberta expected to submit a proposal by July 1 and construction potentially beginning as early as September 2027. While constructive for Alberta energy and long-term export capacity, the project remains early-stage, with no private-sector proponent or route yet in place and further consultation, approvals, and engagement with B.C. still required. 

 

Weekly Diversion: 

Check out this video: Less than 50 days until Stampede! Are you going to try these food options!? 

Charts of the Week 

U.S. equities have continued to rally, with the S&P 500 reaching new highs and moving well above its short-term trend. While this reflects strong momentum, it also suggests the market may be stretched in the near-term. The charts below show both sides of the current setup: some room for consolidation, but also modestly healthy breadth and historically constructive momentum. 

The S&P 500 has rallied sharply over the past month, supported by strength in large-cap technology and semiconductor stocks. This momentum has pushed the index well above its 50-day moving average. As shown in the first chart, the index would need to fall roughly 8% just to return to its 50-day moving average, meaning some consolidation would not be surprising after such a strong advance. Please note this chart was as of yesterday’s close; today, the S&P 500 fell 1.24% narrowing this gap a bit.

Source: Barchart 

The next chart provides a modestly constructive view beneath the surface. The NYSE advance/decline line, which measures how many stocks are rising versus falling, recently reached a new high. This suggests the rally is not being driven only by a small group of mega-cap stocks, but that broader market participation remains relatively healthy. That being said, this A/D Line is still much lower than the market-weighted S&P 500 Index, indicating the headline index may be a bit stretched here.

Source: Carson Investment Research, StockCharts.com, @ryandetrick 

The following table shows that the S&P 500 rose for six straight weeks through last week (the streak ended this week), gaining more than 16% over that stretch. Historically, similar six-week win streaks with gains above 10% have often been followed by above-average forward returns, with the index higher one year later in nearly 89% of prior instances and averaging 12-month gains of roughly 17%. 

Source: Carson Investment Research, FactSet, @ryandetrick 

The final chart adds helpful historical context by showing that stock market highs for the year have rarely occurred in May or June. While short-term pullbacks are always possible, especially now after a sharp move higher, strong momentum, improving breadth, and solid earnings growth suggest the broader backdrop remains constructive for now. 

Source: Carson Investment Research, FactSet, @ryandetrick

Sources:   Yahoo Finance, BBC, Financial Post, Reuters, First Trust, Carson Investment Research, FactSet, StockCharts.com, Barchart, CBC News, @ryandetrick

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