In the Money: 5 Things to Know

Markets under pressure, quantum stocks fall, RBC upgrades BMO & CIBC

Yesterday President-elect Donald Trump spoke at length about all the countries he wanted to take over. Canada, it seems, is on his must-have list. Trump threatened to use “economic force” to make Canada the 51^st state. For a guy who is big on tariffs and stemming immigration, he seems pretty keen on an idea that embraces unconstrained free trade and importing 20 million new workers.

Reversal: Futures are under renewed pressure after a sharp sell-off yesterday, driven by weakness in tech stocks. The culprit was stronger than expected economic data (ISM services), particularly a read of services inflation which came in at the highest level since February 2023. This sparked fresh concerns about inflation and cast further doubt on rate cuts in the United States. This morning, however, we heard from Fed Governor Christopher Waller who said he believes more rate cuts “will be appropriate.” We got a read of job growth in the US (ADP payrolls) that was weaker than expected. This lifted futures a bit. The TSX also fell, but not as much due to a rally in energy stocks. Crude oil is now trading at a 3-month high. Anxieties in the market are also being stoked by a report from CNN that Trump is considering declaring a national economic emergency to push through his tariff plans. European markets are particularly anxious, with yields on the UK 10-year hitting the highest level since 2008.

Quantum leaps: Shares of quantum computing stocks are getting hammered this morning. Nvidia’s CEO Jensen Huang said that very useful quantum computers are over a decade away. That is not how investors saw it. Shares of quantum computing stocks like D-Wave (up 985% over the last year), IonQ (up 292%), Quantum Computing (up 1887%) have surged over the past year. This morning, they are each down more than 20%. “If you kind of said 15 years for very useful quantum computers, that would probably be on the early side. If you said 30, it's probably on the late side," said Huang yesterday at the Consumer Electronics Show in Las Vegas. My first guest on my forthcoming podcast is Eric Jackson of EMJ Capital. He has been a big believer in the quantum rally. I’ll ask him of there is still room to run. If you’ve got a question for him send to questions@inthemoneypod.com

The sun will come up: RBC is upgrading a pair of bank stocks this morning as it calls the landscape for Canadian banks “more favourable”. A combination of higher capital returns to shareholders, better capital markets activity, a peak of loan losses, and the prospect for mortgage growth in the back half of the year underpin this view according to RBC analyst Darko Mihelic. In that spirit, he is upgrading CIBC and BMO to buy. CIBC has already been a winner, trading up nearly 50% over the last year and near a record high. Mihelic sees more upside for the stock with the price target of $103/share implying 19% return from here. BMO, on the other hand, has lagged the group. Mihelic views this as a buying opportunity. “We believe BMO is likely past its credit concerns,” Mihelic wrote in his upgrade referencing loans that were made during the frothy 2021 days. His price target implies 20% upside from here.

Food stuffs: We’ve got some rating changes on a convenience store and grocery stocks this morning. National Bank is upgrading shares of Alimentation Couche-Tard to buy following a tumultuous year for investors as it has been in hot pursuit of the 7-Eleven franchise. Shares of the convenience store operator are trading at a 2-month low and National’s Vishal Shreedhar says now is the time to buy. Conventional wisdom on Couche-Tard is that it needs M&A to be successful. Vishal points out that since 2015 profit growth has been driven equally by M&A and organic growth. Scotia, meanwhile, is shuffling its ratings on grocery stocks. Scotia’s John Zamparo recommends switching from Loblaw to George Weston (which owns Loblaw) in a valuation trade. Simply put, Zamparo thinks Loblaw is fully valued here while George Weston is trading at a wider-than-normal discount to its sum-of-the-parts.

Insulin spike: Shares of Sana Biotechnology are ripping more than 255% right now in the pre-market. The company released positive data for its treatment of type-1 diabetes. They have been developing an approach to diabetes that would allow patients to develop their own insulin without being destroyed by the immune system. Importantly, the study didn’t identify any safety issues. While it is still early days, investors clearly didn’t expect this to work. The stock is down nearly 70% over the past year and nearly 30% of the shares are short. That’s got to hurt this morning.