Hunting for Clues in Corporate Earnings

May 6 to 10, 2024


Hunting for Clues in Corporate Earnings

May 6 to 10, 2024


Market Recap

  • After closing off the month of April in the red, most equities rallied in the latter half of the week, helped by earnings reports (notably Apple), a less-hawkish-than-expected Fed, and some encouraging late-week data.
  • The tech-heavy NASDAQ (+1.4% on the week) led gains among major indices, with the Dow (+1.1%) not far behind.
  • On the other end, the TSX eked out a 0.1% loss. (Note many global markets were closed for at least one day this week, with China closed since Wednesday.)

Rate Expectations

Last week, U.S. Federal Reserve (Fed) Chairman Jerome Powell once again hinted at delaying the timing of rate cuts—yet no one was surprised. Market expectations have moved past June and July toward the fourth quarter, and only one to two rate cuts are now considered probable for the remainder of 2024. It was notable that Powell acknowledged that inflation has been stickier in recent months. However, what garnered less media attention was that he also highlighted the progress that’s been made on inflation. To us, this raises the question: if progress has occurred, why is the rate unmoved? We feel the answer is that a rate cut is forthcoming later in the year. Conversely, when asked about the prospect of increasing interest rates to combat the stubbornness of inflation, Powell said that a rate hike was “unlikely.” The lack of a definitive “no” gave some market participants pause, but we feel it was the correct appraisal of the situation. A rate hike, however improbable, is still a non-zero possibility in this environment and can’t be definitely ruled out. That said, we do not see it as likely.

Bottom Line: Despite Mr. Powell indicating a deferral of interest rate cuts, markets were mostly calm, showing that investor expectations have shifted to later in the year.


Several corporate earnings have, in previous weeks, provided insight into the state of the consumer. It is important, though, to know which particular consumer segments they represent—Starbucks, for example, is the sort of business that figures into the daily spend of many consumers, yet its earnings miss this quarter does not necessarily mean people are closing their wallets. The company is an up-market brand within its segment, similar to what Lululemon represents within leisurewear. Consumers therefore have the option of adjusting their spending patterns to a more economical option—a less expensive coffee, in other words—before they make the decision to stop that daily purchase and instead make a cup at home. It also means less likely add-ons with high margins.  

Apple, on the other hand, really surprised people with their earnings numbers, and two things stood out. First, they initiated the largest stock buyback in history. This can be taken either as them not seeing much opportunity to invest in growth, or them having confidence in their stock and feeling it is undervalued. Right now, I am leaning towards the former. Second, they delivered better-than-expected results out of China. This story is quite positive as it might mean the consumer is starting to spend again, which is very bullish sign not only for China, but also for the broader global economy. This is probably why Apple’s earnings pushed markets significantly higher at the end of last week and why many sectors participated in the rally.

Bottom Line: Although some brands have shown earnings weakness, Apple’s success highlights again that this is not the time to bet against equity markets.


In recent weeks, we have witnessed spikes of volatility in the Japanese yen which appear to be driven by monetary policy. The Bank of Japan has, at long last, followed other central banks in raising interest rates away from the lower zero bound. This shift has naturally led to an increase in the value of the yen, because as yields rise, they tend to lift the value of their underlying currencies. We were not surprised by the movement—if anything, it was a delayed reaction. Closer to home, the Fed looks like it will be the last to cut behind the Bank of Canada and the European Central Bank, which will in effect keep the U.S. dollar (USD) in a dominant position for the rest of the year. The Canadian dollar (CAD) is likely to weaken on a relative basis, possibly even as low as $0.70, due to the higher likelihood that rates will come soon. We even saw the CAD drop by 30 to 40 basis points when the U.S. reported strong jobs numbers. However, we feel the loonie is unlikely to breach below $0.70, as there has often been a mental barrier about going into the sixty-cent range. In Europe, an economic rebound and real productivity gains could help the EUR-USD offset any negative impacts of a more aggressive rate-cutting timetable.

Bottom Line: The Fed will likely cut rates last, which is why we expect the USD to continue to be king.


For a detailed breakdown of our portfolio positioning, check out the latest BMO GAM House View Report, titled Delayed Again: The Soft Landing that Never Comes.


The viewpoints expressed by the Portfolio Manager represents their assessment of the markets at the time of publication. Those views are subject to change without notice at any time without any kind of notice. The information provided herein does not constitute a solicitation of an offer to buy, or an offer to sell securities nor should the information be relied upon as investment advice. Past performance is no guarantee of future results. This communication is intended for informational purposes only.

BMO Global Asset Management is a brand name under which BMO Asset Management Inc. and BMO Investments Inc. operate.

Any statement that necessarily depends on future events may be a forward-looking statement. Forward-looking statements are not guarantees of performance. They involve risks, uncertainties and assumptions. Although such statements are based on assumptions that are believed to be reasonable, there can be no assurance that actual results will not differ materially from expectations. Investors are cautioned not to rely unduly on any forward-looking statements. In connection with any forward-looking statements, investors should carefully consider the areas of risk described in the most recent simplified prospectus.

This article is for information purposes. The information contained herein is not, and should not be construed as, investment, tax or legal advice to any party. Investments should be evaluated relative to the individual’s investment objectives and professional advice should be obtained with respect to any circumstance.

Commissions, management fees and expenses (if applicable) all may be associated with investments in mutual funds. Trailing commissions may be associated with investments in certain series of securities of mutual funds. Please read the fund facts, ETF facts or prospectus of the relevant mutual fund before investing. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated. Distributions are not guaranteed and are subject to change and/or elimination.

For a summary of the risks of an investment in the BMO Mutual Funds, please see the specific risks set out in the prospectus. ETF Series of the BMO Mutual Funds trade like stocks, fluctuate in market value and may trade at a discount to their net asset value, which may increase the risk of loss. Distributions are not guaranteed and are subject to change and/or elimination.

BMO Mutual Funds are managed by BMO Investments Inc., which is an investment fund manager and a separate legal entity from Bank of Montreal.

®/™Registered trademarks/trademark of Bank of Montreal, used under licence.


Sadiq Adatia
Sadiq Adatia
May 27, 2024

Nvidia Wins Again. But Do Markets?

Are markets too hung up on Nvidia and A.I. as they wait for interest rate certainty? Is it time to abandon hope for rate cuts this year?
Sadiq Adatia
Sadiq Adatia
May 21, 2024

Walmart Hit Record Highs. Will Other Companies Follow?

Are Walmart’s strong earnings an indication of how consumers are spending? Will cooling inflation data affect the schedule for rate cuts?
Steven Shepherd profile photo
May 16, 2024

BMO ETF Portfolios’ May commentary: “Jerome and the very topsy, turvy market”

Following a stormy April, markets returned to the “bad news is good news dynamic”, following the U.S. Federal Reserve Board’s decision to hold rates…
House view
May 15, 2024

The Fed’s Last Stand: A Solitary Rate Cut Expected for 2024

As Spring begins to fade, the continuation of uncertainty on interest rate cuts remains of paramount importance.
Sadiq Adatia
Sadiq Adatia
May 13, 2024

The Secret Recipe for an Earnings Rally

Is it resilient earnings or weak outlooks that are driving markets? Do business owners expect the economy to weaken?
Sadiq Adatia
Sadiq Adatia
April 29, 2024

The Tesla-Meta Paradox

What do Tesla and Meta’s earnings announcements mean for markets? Will sticky inflation alter the interest rate outlook?

Website attestation

you are entering the BMO Global Asset Management (GAM) Institutional website.

Read our Terms and Conditions
Click here to contact us

This information is for Investment Advisors only. By accepting, you certify that you are an Investment Advisor. If you are NOT an Investment Advisor, please decline and view the content in the Investor or Institutional areas of the site. The website is for informational purposes only and is not intended to provide a complete description of BMO Global Asset Management’s products or services. Past performance is not indicative of future results. It should not be construed as investment advice or relied upon in making an investment decision. The opinions expressed are subject to change without notice. Products and services of BMO Global Asset Management are only offered in jurisdictions where they may be lawfully offered for sale. The information contained in this website does not constitute an offer or solicitation by anyone to buy or sell any investment fund or other product, service or information to anyone in any jurisdiction in which an offer or solicitation is not authorized or cannot be legally made or to any person to whom it is unlawful to make an offer of solicitation. All products and services are subject to the terms of each and every applicable agreement. It is important to note that not all products, services and information are available in all jurisdictions outside Canada.