August 23, 2016

On Tuesday, the U.S. markets closed near record highs with the S&P 500 up 0.2% to 2187. And Toronto was up 0.1% to 14,765.

As hoped and expected, Toll Brothers had a very strong day and gained 8.8% to $31.91. Interestingly it started off the day only up a bit over 2% around the first hour of trading. The earnings per share were up over 50% although somewhat less than that on an adjusted basis. Overall, the company and the U.S. home building industry are firing on all cylinders and it seemed clear that this stock was under-valued. I don’t see any reason why it should pull back now. I would think it should make further gains (at least relative to the overall market) in the next few days as analysts digest the strong earnings report. Despite the strong report there is always someone viewing things negatively and some headlines have suggested that the company “missed earnings expectations”.

Bank of Montreal reported better than expected earnings today. That is positive for Canadian banks in general except that it did also report significantly higher loan losses and its added profits came from the U.S. operations and capital markets and not domestic lending. Banks more focused on the Canadian household and commercial market may not fare as well this reporting season.