There weren't any S&P 500 earnings reactions on Tuesday, but North of the border, Canada's banking giants are stealing our attention.
From Wall Street to Frankfurt to Hong Kong, financial stocks are climbing higher together.
Now, the Canadian giants - the Big 5 - are joining in, and they’re doing so in spectacular fashion.
The Royal Bank of Canada $RY, Toronto-Dominion $TD, Bank of Montreal $BMO, Canadian Imperial Bank of Commerce $CM, and Bank of Nova Scotia $BNS form the backbone of the Canadian financial system.
Together, they represent nearly a third of the country’s stock market in terms of market capitalization.
When they move in concert, it’s not just a story about individual earnings reports - it’s a vote of confidence for Canadian equities by global investors.
We think the party hasn't even started yet:
Our equal-weighted basket of the Big 5 has spent years carving out a textbook accumulation pattern.
Now, that range is on the verge of resolving higher, with the index pressing against its former highs and threatening to break out to new records.
A breakout from here would mark the beginning of a brand-new primary uptrend for the group.
Here's the fundamental backdrop for these stocks:
The strength isn’t just technical. The fundamentals of the group are improving in tandem.
Every one of the Big 5 trades above book value, with price-to-book ratios ranging between 1.4 and 2.2. That premium tells us investors are confident in the banks’ ability to compound capital.
Return on equity (ROE) - the standard measure of profitability for financial institutions - is strongest at the Royal Bank of Canada (the largest one) and Toronto-Dominion, both of which have an ROE of 14%.
Yet the biggest surprise has come from the Bank of Montreal. With a mid-pack ROE of 10% and one of the cheapest valuations at just 1.5 times book, BMO has outpaced its peers with a 38% gain over the past year.
We also love how BMO's beat streak (consecutive positive earnings reactions) is confirming its leadership.
Meanwhile, the Royal Bank of Canada, with a $194B market capitalization, is the slowest mover of the group - but even it has gained a respectable 21% over the past year.
In other words, the tide is lifting every ship.
Tuesday was a day for the gap-n-go:
Tuesday’s earnings reactions underscored the shift in sentiment for these stocks.
Bank of Montreal and Bank of Nova Scotia both reported results before the opening bell, and the response couldn't have been more bullish.
Shares of both banks surged out of multi-week consolidations, gapping higher at the open and closing at the top of their daily ranges.
In technical terms, these were textbook gap-and-go moves, one of our favorite bullish candlestick patterns.
Bank of Montreal posted more than 25% year-over-year growth in net income, a remarkable showing for a bank of its size.
Investors loved the report, sending shares to new 52-week highs.
Bank of Nova Scotia’s double beat was met with the same enthusiasm.
The earnings reactions for BMO and BNS were each the best since 2020.
Overall, it couldn't have gone better for these stocks.
We think RY is set up to have a similar earnings reaction on Wednesday:
The Royal Bank of Canada, the largest lender in the country and one of the world's most important financial institutions, is next in line.
It reports Wednesday morning, with consensus estimates calling for $11.59B in revenue and earnings of $2.39 per share.
The stock has already broken to new all-time highs, surging out of a massive base that had been developing since 2021.
Price action leading up to earnings could not be more bullish. Traders are effectively front-running the results, betting that the fundamentals will justify the breakout.
Later in the week, we'll hear from CM:
The Canadian Imperial Bank of Commerce follows on Thursday.
Unlike Royal Bank, its stock has been coiling tightly after a powerful advance earlier this year.
Earnings estimates sit at $5.09B in revenue and $1.45 in EPS.
The setup suggests a significant move is coming, and the report will likely serve as the catalyst.
If the reaction is positive, the breakout would mark a continuation of the bank’s new surge to all-time highs.
We'll also hear from TD on Thursday:
Toronto-Dominion rounds out the reporting week for the Big 5.
After rallying 50% from the low late last year, the stock has carved out a textbook continuation pattern. The setup looks like a coiled spring, waiting for a spark.
Analysts are forecasting $13.74B in revenue and earnings of $2.06 per share. A strong report could provide the fuel to propel the stock to fresh multi-year highs.
The story here is not just about earnings beats and positive reactions... It’s about structural breakouts across the Canadian banking sector - moves that align with the global rally in financials.
We're seeing the strongest earnings reactions in half a decade, and valuations are being repriced higher.
When the largest, most systemically important banks in a country all break out together, the signal is hard to ignore.
Canada’s financials are sending a message that echoes across borders that the bull market in global banks is alive and well.
Don’t fight this trend.
Happy fishing
-The Beat Team
P.S. The Big 5 aren’t moving in isolation. They’re part of a global surge in leadership stocks from every corner of the world.
That’s exactly what we track in our International Hall of Famers and Junior International Hall of Famers reports.
These scans highlight the largest, strongest international stocks poised for breakouts - whether it’s Canada’s banking giants, Europe’s industrial leaders, or Asia’s tech innovators.
If you’re serious about capturing the next wave of global leadership, you’ll want these names on your radar.
