In the Money: 5 Things to Know

Futures slightly higher, banks continue to beat, UnitedHealth misses, CN Rail upgraded (again)

Four years ago I wrote a letter of support for a crossing guard near my daughter’s school. I haven’t thought about it once since then… until yesterday. I got an email from the City of Toronto saying that they had reviewed my request and denied it. Honestly, probably the right call considering the school isn’t there anymore. But makes me wonder if they would mind if I was four years behind on my taxes.

A new episode of In the Money with Amber Kanwar just dropped this morning. In this episode I interview veteran resource investor Rick Rule who is known mostly for his mining investments but all his top ideas were in the energy sector. You can listen on Apple and Spotify. The video interview will be up on YouTube later today.

Risk-on(ish): Futures are slightly higher this morning after a strong session yesterday. The exception is the Dow Jones Industrial Average due to weaker results from UnitedHealth (more on that below). On the flip side, tech stocks are getting a lift courtesy of Taiwan Semiconductor (chipmaker for Nvidia) after results came in better than expected, sales jumped 37% from last year and the company signaled robust growth for its AI-related business. Yesterday’s big gains were fueled by a combination of slightly weaker than expected inflation (though levels are still elevated) and better than expected bank earnings. The TSX put in its best single day since November. The NASDAQ finished higher for the first time in six sessions as it staged its best one day rally (2.45%) since Trump’s victory in November. The US markets are now up more than 1% so far in 2025, compared to the TSX which is only up 0.25%. This morning we have earnings from Bank of America, Morgan Stanley and a few regional banks. We got a read of retail sales in the US which didn’t advance as much as expected.

Check up: UnitedHealth reported quarterly results for the first time since the killing of its UnitedHealthcare division CEO Brian Thompson. The stock is down nearly 4% in the pre-market after missing sales expectations for the first time in four years (sales grew nearly 7% to hit a record $100.8 billion for the quarter but analysts were expecting $101.6 billion). In addition, a key metric of profitability (medical ratio) came in worse than last year. Keep in mind the stock ran up into quarterly results but has generally been under pressure since Thompson was murdered. The killing put a spotlight on the insurers practices and investors were concerned that a political backlash would put pressure on the business. In addition, the company has been facing lower reimbursements from government programs. The conference call is at 8:45amET and I’ll be listening to see how they address investor concerns.

Bank on it: Investors aren’t sure what to do with Bank of America this morning. The bank beat profit expectations in a quarter that also featured strength in deal making and trading. All of these banks clearly benefitted from a surge in trading after Donald Trump was elected President in November. Bank of America also said a key measure of profit (net interest income) would be higher than expected for 2025. However, Evercore analyst Glenn Schorr points out that the magnitude of the beat isn’t on par with the “blowouts” we saw yesterday. “Still, (Bank of America) represents a more methodical steady growth, lower risk option in the group and should have more upside to loan & deposits growth improving and the general ramp in (net interest income),” wrote Schorr. He’s got a buy rating on the stock.

Traders take the glory: Morgan Stanley is higher after handily beating profit expectations ($2.22/share vs $1.70 expected). Total sales, investment banking and trading all came in higher than expected. It is a repeat of what we saw from big banks like Goldman Sachs and JPMorgan yesterday. Profit doubled from last year and it is a feather in the cap of CEO Ted Pick who took over from James Gorman last year. The stock is up nearly 60% since then.

Notable Calls: It is getting harder to ignore the upgrades on CN Rail. Yet another analyst is upgrading the beleaguered rail company. On the face of it, piling into a railroader might not seem like the best place on the eve of a possible trade war. However, Stifel is upgrading the stock to buy largely for the same reason others have upgraded the stock: valuation. With the stock trading near a 14-month low, it has rarely been this cheap. First Quantum may come under pressure today after its copper production forecast missed estimates and Canaccord downgraded the stock. In the US, shares of Southwest Airlines are slipping after the Department of Transportation filed a lawsuit saying the airline didn’t establish realistic flight schedules and a downgrade to sell from Citi. Earnings quality has been falling, but the valuation has gone up points out Stephen Trent of Citi in his downgrade. “Relative to its pre-COVID positioning, Southwest Airlines now has lower pre-tax margins vs. its domestic network peers…” he wrote, “…Despite these headwinds, Southwest went from trading at an historical, pre-pandemic premium of 50% vs. Delta and United, to a substantial 2025 premium of 135%.”