In the Money: 5 Things to Know

Futures mixed, Alcoa warns about tariffs, Birchcliff cuts the dividend, Eight Capital news

A new episode of In the Money with Amber Kanwar is out. Like my children, I love all my episodes equally. But this one is extra special because I was able to get my mentor Frances Horodelski and one of my all-time favourite guests John Zechner in a room together to talk markets. They both know so much about so much. I hope you will tune in! You can listen on Apple, Spotify or here.

Breathe: US futures are indicating a softer open this morning after a rally yesterday left the S&P 500 sitting 0.06% away from an all-time high. Today we’ve got disappointing earnings from Electronic Arts (-16% in pre-market) and a surprise profit warning from American Airlines (-5% in pre-market) weighing on sentiment. However, with a gain of 3.5% so far in 2025 the S&P 500 is off to the best start to the year since 2019. The TSX meanwhile eked out a small gain yesterday and is up 2.3% for the year. The global strategist at UBS, Andrew Garthwaite, wrote that the markets are displaying six out of seven conditions for a stock market bubble. Some of the criteria include the fact that its been 25 years since the last bubble and the growth of retail participation in the market. While valuations are historically elevated, I’d argue we haven’t seen a burst of broad speculative activity or IPOs flooding the market. Garthwaite does caveat by saying the bubble could be warranted if AI leads to a big productivity boost. Right now it is looking like the Trump trade and the AI trade are one and the same after the big $500 billion AI announcement yesterday. Speaking of Trump, he will speak virtually at the World Economic Forum this morning at 11am. No doubt investors will be looking for clarity on tariffs (the other Trump trade). We just got a read of retail sales in Canada for November which were very weak. No growth in sales for the month of November and an outright decline (-0.7%) when you exclude autos.

Heavy metal: Alcoa reported quarterly results and warned the prospect of tariffs on Canadian imports would drive up prices for Americans. Canada is the largest supplier of aluminum from smelters to the United States. Alcoa CEO William Oplinger warned that a 25% tariff on Canadian imports would increase costs for US aluminum users by $1.5-$2 billion dollars and undermine the industry’s competitiveness. He warned it would also be a logistical headache because the company would ship its aluminum to Europe while the US would likely start bringing in aluminum from India or the Middle East where there is only a 10% tariff. "Literally, you'd see ships passing in the Atlantic carrying the exact same product back and forth," Oplinger said in a Wall Street Journal report, "It doesn't make a lot of sense."

Medical marvel: Shares of Elevance are surging 5% in the pre-market after boosting its dividend and reporting lower medical costs. The health insurer has underperformed the market along with peers as medical costs rose and Washington cracked down on how much they were willing to pay. Last quarter the company cut its profit forecast and the stock nosedived. Today’s quarterly results are a welcome relief to investors, especially since medical costs were lower than expected. Is this a turning point for the sector? Shares of UnitedHealth, Cigna and CVS are trading up in sympathy.

Second time around: Birchcliff is cutting its dividend again almost exactly one year from the last time it cut its dividend. The natural gas producer cut its dividend in half last year and today announced it was further reducing its payout by 70%. But the stock is likely to trade up on the news. “We view this as the final step in rightsizing the previously unsustainably large dividend,” wrote Aaron Bilkoski of TD Cowen who upgraded to stock to buy on the back of the announcement. In fact, I see three upgrades this morning. Birchcliff is famously unhedged and with natural gas prices ripping higher, should be a beneficiary of the rally. However, investors were not rewarding its high divided yield and instead penalized the stock for being on a financially unstable path. The upgrades today reflect comfort that they are reinvesting in the business instead of focusing on income and their dividend is now on more sustainable footing with just a 2% yield.

Scuttlebutt: The unwind of Eight Capital is probably the worst kept secret on Bay Street. The Globe & Mail and Bloomberg both reported that Eight Capital voted to dissolve the company last week and several employees will now be joining Stifel. Stifel will officially hire 13 people from Eight Capital, a source familiar with the matter told me. Dave Morrison will be joining as co-head of equities with Craig Brenner while Kevin Costa will become head of trading. The influx of Eight Capital employees means the departure of some Stifel employees, according to the source. Nine employees will be leaving Stifel. The new employees coming from Eight Capital will focus on sales & trading and investment banking, particularly in mining. This comes after about three years of virtually no deal activity in Canada. Stifel has been able to survive thanks to its US business, while Eight struggled in the recent commodity famine. Eight was born out of Dundee Capital back in 2016 and was known as an active player in the junior mining sector.