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 BMO Equal Weight Banks Index ETF (ZEB.TO) & SPDR S&P Retail ETF (XRT)

Stocks have dropped off sharply in the last week as a correction accelerated and deepened. The main catalyst for the reversal has been a growing sense that central banks may not be as close to pausing their interest rate tightening programs as previously thought, exacerbated by trading around a North American long weekend and last Friday’s monthly options expiry.

Amid a number of hawkish comments from FOMC members, the US 10-year treasury note yield continued its recent climb, this time from near 3.80% toward 3.95%. This increased the tailwind behind the US Dollar which then put pressure on stocks, commodities and non-US currencies. In addition, the Reserve Bank of New Zealand, who has been leading the hawkish trend among central banks, raised its benchmark rate another 0.50% to 4.75% and indicated that is does not see its fight against inflation as being over even though price pressures have eased somewhat. February has flown by and month-end is only 3 trading days away after today. In terms of economic news, inflation remains a focus with US Core PCE inflation, the Fed’s favorite measure due tomorrow. Next week, US durable goods orders are due on Tuesday followed by Manufacturing PMI numbers from around the world as the calendar flips to March on Wednesday.

Bank earnings week in Canada kicks off tomorrow (yes, a rare Friday report) with CIBC putting out numbers with all of the other major banks reporting results between Tuesday and Thursday of next week. Earnings reports from US retailers have been mixed so far but a lot more are on the way, headlined next week by Target on Tuesday and Lowes on Wednesday. A number of alternative energy companies are reporting as well including First Solar and Rivian.

In this edition of the Equity Leaders Weekly, we take a look at recent action in the Canadian Banking and US Retailing sectors heading into their respective earnings seasons.

BMO Equal Weight Banks Index ETF (ZEB.TO)

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