Last week, North American equity markets ended lower despite robust US bank results and softer-than-expected US inflation data, weighed down by escalating geopolitical tensions and rising concerns over the sustainability of the AI trade. WTI crude oil prices spiked to US$80 per barrel, driven by intensified fighting between the US and Iran for control of the Strait of Hormuz and President Trump’s reinstatement of a blockade on Iran. As a result, the energy sector was the best performer on both the TSX Composite and the S&P 500.

Wall Street banks delivered exceptionally strong top-line results, fuelled by a surge in dealmaking and equities trading. Shares of Goldman Sachs surged 9.0%, while JPMorgan Chase, Bank of America, and Morgan Stanley rose 2.5%, 1.9%, and 0.4%, respectively. High-profile transactions—including the SpaceX IPO, a major Alphabet share sale, and AI-driven financing—drove investment banking fees and transaction pipelines to multi-year highs. However, investors were quick to penalize institutions showing cracks in cost control or forward momentum. Citigroup shares tumbled 5.3% as rising expense concerns overshadowed its results, while Wells Fargo slipped 2.7% after issuing an unchanged forecast despite a strong quarter.

Despite the strong quarterly performance, bank executives painted a mixed picture of the broader economy. Leaders from JPMorgan, Bank of America, and Wells Fargo highlighted a remarkably resilient US consumer but cautioned that persistent inflation, high asset valuations, tight monetary policy, and geopolitical risks could eventually disrupt this favourable environment.

Elsewhere in financials, BlackRock shares jumped 6.6% after assets under management hit a record US$15 trillion. The firm pulled in US$192 billion in net inflows across its iShares ETF franchise, pushing its operating margin to a five-year high while quickly expanding into higher-fee alternatives via US$28 billion in recent private market acquisitions.

In the technology sector, IBM suffered its worst trading day on record, plummeting 25% following preliminary second-quarter results that missed expectations. Management attributed the miss to clients suddenly shifting spending from software towards hardware ahead of anticipated price hikes. Escalating AI workloads are favouring memory chipmakers like Micron and SK Hynix, causing large IBM software deals to stall and raising fears that AI growth may negatively impact its core business.