Robust Bank Results Propel Canadian Stocks as Buoyant Market Sentiment Builds Around Fed Action

Canadian equities finished higher on Wednesday, driven by a combination of strong financial sector performance and growing speculation over an imminent Federal Reserve rate reduction. The S&P/TSX Composite Index concluded the session at 31,160.54, advancing 111.26 points or 0.36%, following a volatile trading day that saw seven of eleven sectors posting gains.

Banking Sector Leads Recovery

The buoyant performance of Canada’s major lenders underpinned the broader market movement. Royal Bank of Canada announced a 6.5% increase to its quarterly dividend following exceptional fourth-quarter results. The lender generated C$5.43 billion in net income, translating to C$3.76 per share—a significant improvement from C$2.91 per share in the prior year period. Revenue climbed 14% to C$17.21 billion compared to C$15.07 billion last year, while adjusted earnings per share reached C$3.85 for the quarter ending October 31.

National Bank of Canada released fourth-quarter earnings showing resilience across its business lines. Net interest income jumped to C$1,169 million from C$784 million year-over-year, though net income slightly moderated to C$1,059 million from C$955 million. The bank is expanding its consumer banking footprint through the acquisition of Laurentian Bank’s retail and small business divisions. Bank of Nova Scotia previously posted robust results, while TD Bank, BMO, and CIBC remain scheduled to release their earnings later in the week.

Market Drivers: Rate Expectations and Economic Backdrop

The U.S. Federal Reserve’s widely-anticipated interest rate decision next week is commanding investor attention. Market pricing suggests an 89% probability of a quarter-point reduction, supported by recent dovish signals from Fed officials and softening labor market indicators. The Bank of Canada will announce its own rate decision on the same day, intensifying focus among market participants on policy synchronization between the two central banks.

On the economic front, Statistics Canada reported that business labor productivity rebounded 0.9% quarter-on-quarter in Q3 2025, reversing a 0.8% contraction from the prior quarter. Real business GDP similarly recovered 0.9%, reflecting improved operational efficiency across sectors. However, the S&P Global composite PMI painted a more cautious picture at 44.9 for November, declining from 50.3 in October, with services-sector activity cooling to 44.3 from 50.5.

Sectoral Performance and Trade Headwinds

Energy stocks led daily gainers with a 1.99% advance, followed by Healthcare (1.66%), Industrials (1.24%), and Information Technology (0.65%). International Petroleum Corp surged 7.74%, while Tamarack Valley Energy and Cenovus Energy rose 3.73% and 3.66% respectively. Curaleaf Holdings and TFI International contributed with gains of 4.63% and 3.23%.

Real Estate retreated 0.29%, Utilities declined 0.50%, Communication Services fell 0.77%, and Consumer Staples dropped 1.00%. Notable decliners included Rogers Communications (down 2.42%), Empire Company (1.57%), and Loblaw Co (1.39%).

Trade uncertainties continue reshaping the economic landscape. Following the suspension of trade negotiations with the United States, Canadian leadership has prioritized diversification of trade partnerships. The trilateral CUSMA agreement faces potential review by July 2026, creating uncertainty for businesses. Meanwhile, current tariffs of 35% on non-CUSMA goods have pressured domestic manufacturers. Algoma Steel is preparing workforce reductions of approximately 1,000 employees—representing 40% of its labor force—and shutting its northern Ontario blast furnace operation. The steelmaker’s third-quarter sales contracted 13% amid these pressures.

Ivanhoe Mines (up 8.55%), Capstone Mining (8.36%), and International Petroleum Corp dominated market-moving activity, underscoring renewed interest in commodity-linked equities amid global economic navigation.