| Close
Jun 05 | Close
May 29 | Weekly
Change | Net Weekly
Change % |
DJIA | 50,866.78 | 51,032.46 | -165.68 | -0.32% |
Nasdaq | 25,709.43 | 26,972.62 | -1,263.19 | -4.68% |
S&P 500 | 7,383.74 | 7,580.06 | -196.32 | -2.59% |
| S&P TSX | 34,413.45 | 34,769.14 | -355.69 | -1.02% |
Source: Globe & Mail
Tariff Up, Tariff Down, Tariff Tariff All Around
Michael Gregory, CFA
Deputy Chief Economist
The recent torrent of tariff news emphasizes Washington’s attempt to reconstruct a lasting tariff wall and re-exert enduring geoeconomic pressure. It also highlights its willingness to adjust duties down owing to domestic economic considerations.
On June 2, the U.S. Trade Representative (USTR) announced the results of its Section 301 (unfair trade practices) investigation into the failure of 60 regions to effect rules that prevent imports that were produced with forced labour. It was determined that there was a lack of rules in 54 countries, for which a 12.5% levy was proposed. For the other six (including Canada and the EU), it was determined there were rules in place but that they were not effectively enforced, and a 10% tariff was proposed.
Note that there are lots of exemptions including food, energy, and critical minerals along with any goods that are already incurring Section 232 (national security) tariffs, are USMCA-compliant, or are textiles from certain Latin American countries. Note also that the new 10%-to-12.5% duties are comparable to the soon expiring 10% global tariff. Effective July 24, the latter levy is scheduled to disappear unless Congress extends it, which it won’t in an election year when affordability issues are top of mind (and given the fact that a lower court has already ruled them as being unlawful).
It is interesting that this investigation was announced March 12, and it was completed June 2, when it typically takes up to a year (or longer) to complete a Section 301 investigation. This suggests the groundwork for this began before the February 20 ruling by the Supreme Court that IEEPA-imposed tariffs were unlawful. It looks like ‘301’ is the new highway to broad based tariffs, and we await the results of the investigation into 16 countries that maintain ‘unfair’ excess capacity in manufacturing.
Meanwhile, on June 1, a positive determination was announced in the investigation that started July 15, 2025, into Brazil’s unfair trade practices. This covered: digital trade and electronic payment services; unfair, preferential tariffs; anti-corruption enforcement; intellectual property protection; ethanol market access; and illegal deforestation. The USTR is now soliciting comments on the appropriate tariff remedies along with negotiating with the Brazilian government.
Also, on May 29, the USTR launched an investigation into Vietnam’s intellectual property protection and enforcement. A similar investigation into China during the first Trump Administration determined that there were unfair practices which became the justification for broad-based tariffs (mostly 25%) on China. These duties have since remained in place.
Finally, on June 1, the President signed a Proclamation lowering Section 232 tariffs on certain steel, aluminum, and copper derivative products. When metal duties were first introduced last year, it was the metal content in derivative products that was taxed at 50%. In April of this year, the tariff was changed from 50% on the metal content to 25% of the product’s full value, which was a much more onerous levy. At the time, the duty on ‘fixed’ industrial machinery and power equipment was set at 15%. That lower tariff rate will now be applied on ‘mobile’ industrial equipment (think agricultural, construction, and some factory equipment), along with residential heating, ventilation, and air conditioning equipment. Bottom Line: The tariff ball is bouncing again.
Frank and Mark.
Source: Globe & Mail, BMO Capital Markets, Bank of Canada, Bloomberg.
Canada
The TSX had an up-and-down week, ending 1.0% lower. Drilling down, health care and consumer staples were the top performing sectors, while materials and tech experienced the biggest losses. Canada also released its May employment data on last Friday, and the results certainly turned heads as the massive 88k increase helped reverse a good chunk of the weakness over the past few months in one fell swoop. It also helped balance recent weak GDP results which had flagged a technical recession (i.e., consecutive quarterly contractions). As far as monetary policy goes, we think the mixed signals should keep the Bank of Canada glued to the sidelines for the time being.
YTD, the TSX is up 8.52%, and the benchmark 10-year yield ended the week to yield 3.46%.
U.S. & Global
Global equities had a bumpy stretch last week culminating in a nauseating Friday dip as strong labour market data reignited interest rate concerns and hopes for progress in the Middle East peace process faded. Despite a string of mostly solid corporate earnings, selling pressure on ‘Big Tech’ was also sparked by some underwhelming guidance which disrupted the AI-fueled rally. In North America, this was reflected in Nasdaq underperformance, which fell 4.7% compared to previous Friday’s close. That was also evident in South Korea's semiconductor heavy KOPSI index which finished last week 3.7% lower, after last Friday's plunge, but still only reversed a fraction of its massive year-to-date gain (+94%).
Last Friday’s slump also tipped the S&P 500 into negative territory, ending the week down 2.6%. Sector-wise, technology and consumer discretionary lagged, while banks and energy outperformed. Macro data played a part in Friday’s dip, as the relatively solid U.S. jobs picture piled on to rate hike worries, though whether those concerns are well-founded or not is up for debate. In any case, markets priced in slightly higher rate hike odds for the year after May U.S. payrolls rose 172k, handily topping expectations, while the unemployment rate held steady in its narrow range of recent quarters. One knock on the May data was the breadth of job gains (or lack thereof). That is, most job gains were concentrated in a few sectors, namely local government jobs (+55k), leisure & hospitality (+70k) and health care & social assistance (+47k). Still, gains are gains, making the case for near-term rate cuts appear a little more difficult. The new Fed Chair may beg to differ, but we’ll have to wait until the mid-June meeting to see how he tries to steer the FOMC.
Waiting for good-flow… Another key theme pulling stocks in either direction last week was the situation in the Middle East, where tensions remained elevated and the Strait of Hormuz effectively stayed shut. While there were some brief glimpses of hope for peace deals between both the U.S. and Iran, and Israel and Lebanon, those prospects had faded by last Friday amid Hezbollah's ceasefire rejection and continued hostilities in the region. Despite the turmoil, WTI crude ended last week just a few bucks higher (~$90/bbl), which is elevated but still well below recent highs.
YTD, the DJIA is up 5.83%, the NASDAQ is up 10.62%, and the S&P 500 is up 7.86%. The 10-year Treasury yield ended the week to yield 4.54%.
Source: BMO Capital Markets
The Good:
Employment +87,800 (May)—full-time surges by 154,000; Jobless Rate -0.3 ppts to 6.6% (May); Average Hourly Wages slowed to +3.0% y/y (May); S&P Global Services PMI +1.4 pts to 50.6 (May); Ivey PMI +0.5 pts to 58.2 (May)
The Bad:
Labour Productivity -0.5% (Q1); Auto Sales -1.7% y/y (May); S&P Global Manufacturing PMI -0.4 pts to 52.9 (May)—but still expansionary
The Good:
Nonfarm Payrolls +172,000 (May); Jobless Rate steady at 4.3% (May); Average Hourly Earnings +0.3% (May); Job Openings picked up to 7,618k (Apr.); Auto Sales edge up to 16.2 mln a.r. (May); Factory Orders +4.8% (Apr.); ISM Manufacturing PMI +1.3 pts to 54.0; Services PMI +0.9 pts to 54.5 (May)—but price pressures broadening; Construction Spending +0.4% (Apr.); Global Supply Chain Pressure Index edged down to 1.77 (May)—first decline in 4 months
The Bad:
Productivity revised down to +0.3% a.r. (Q1)—but; Unit Labor Costs also revised lower; Initial Claims +13k to 225k (May 30 week)
Source: Associated Press
Radio scans find no alien tech from the latest interstellar comet
Marcia Dunn
CAPE CANAVERAL, Fla. (AP) — The group leading the charge in the search for extraterrestrial life has given the all clear: An interstellar comet looks to be completely natural and free of any alien tech.
The SETI Institute said Wednesday that extensive radio scans by its telescope in Northern California found no signs of otherworldly technology from our solar system’s latest interstellar visitor.
The object labeled 3I/Atlas was discovered last summer sweeping through our neck of the cosmic woods. Scientists quickly identified it as a comet that migrated from another star, although a few insisted without evidence it might be associated with intelligent life.
It’s only the third known object from a faraway star — all deemed of natural origin — to venture into the sun’s turf.
Several NASA spacecraft observed the celestial iceball as it swung past Mars last October, venturing within 19 million miles (30 million kilometers) of the red planet. The closest it ever got to Earth was in December at a whopping 167 million miles (269 million kilometers) away.
SETI said it conducted more than seven hours of observations in July soon after the comet was discovered, searching through a wide range of radio signals. The team identified nearly 74 million narrow-band radio signals.
After accounting for human interference or signals matching the object’s movement, only slightly more than 200 signals remained, all of which “traced back to technology on the surface of the Earth or our own Earth-orbiting satellites,” according to SETI.
Results were published in the Astronomical Journal.
These results “show how realistic it is to detect a signal with the technology we have today,” co-author Valeria Garcia Lopez of Furman University said a statement. “That is why it is important to keep searching for technosignatures, even from objects we might not expect to have signals.”
SETI’s Sofia Sheikh, the lead author, and her team pointed out that NASA’s Voyager spacecraft will one day become extraterrestrial objects in neighboring star systems. Launched in the 1970s, the twin probes are the most distant spacecraft from Earth, drifting in the space between stars.
“Voyager and similar probes will eventually become interstellar objects in other stellar systems. We thus know that no extrapolation is needed for the idea of interstellar technological objects, as we have a proof by existence,” they wrote.
Almost 1 billion miles away now (1.3 billion kilometers) as it makes its way back to interstellar space — never to return — the comet is estimated to be within 1,444 feet (440 meters) and 3.5 miles (5.6 kilometers) in size. Scientists suspect it could be as old as 11 billion years, twice as old as the sun.