S&P/TSX Sees Significant Gains as U.S. Markets Respond Positively

TORONTO — Canada’s main stock index, the S&P/TSX composite index, experienced a notable increase of almost 200 points on Friday, closing at 24,599.48, following a turbulent week for the markets. This rise was part of a broader trend, with major U.S. stock indexes also climbing more than one percent as trading came to an end for the week.

U.S. Market Performance

In the United States, the Dow Jones industrial average surged by 498.02 points, finishing at 42,840.26. The S&P 500 index increased by 63.77 points, closing at 5,930.85, while the Nasdaq composite index rose by 199.83 points to reach 19,572.60. These positive movements marked a sharp rebound from the significant declines earlier in the week.

The Week's Market Decline

The rallies on Friday came in the wake of a rough week, particularly on Wednesday when the markets faced steep drops. After the U.S. Federal Reserve announced a cut in its key interest rate and signaled limited future cuts in 2025, investor reactions resulted in the S&P 500 dropping almost three percent. Similarly, the TSX declined over two percent, while the Nasdaq and the Dow were down by 3.6 percent and 2.6 percent, respectively.

Ilana Schonwetter, an investment advisor at Blueshore Financial, noted that this was among the largest daily declines seen in 2024. However, she added that the market rebound over the last two days could be viewed as a reaction to the Fed's announcements.

Current Economic Outlook

According to Schonwetter, the Fed's decision to adopt a less aggressive stance on interest rates reflects the strength of the U.S. economy. She emphasized that the fundamentals for the U.S. economy remain solid. In contrast, there are lingering concerns about the Canadian economy, intensified by political instability this week, specifically the resignation of Finance Minister Chrystia Freeland and uncertainty about Prime Minister Justin Trudeau's future.

For Canadian investors, the expectation is that the Bank of Canada may cut rates more aggressively next year compared to their U.S. counterparts. The central bank is likely monitoring unemployment figures closely, as the recent uptick in unemployment may influence future rate decisions. A disparity between the Bank of Canada’s rates and those of the Fed could lead to inflationary pressures, especially if the Canadian dollar continues to depreciate. The Canadian dollar traded at 69.61 cents U.S. on Friday.

Commodity Market Trends

In commodities, the February crude oil contract saw a rise of eight cents, ending at US$69.46 per barrel. The January natural gas contract increased by 17 cents, closing at US$3.75 per mmBTU. On the precious metals front, the February gold contract gained US$37, reaching US$2,645.10 an ounce, while the March copper contract inched up by two cents, finishing at US$4.10 a pound.

This week’s market activity illustrates the volatile nature of trading as investors respond to economic signals and political developments. As markets stabilize, attention will shift to upcoming economic indicators that could shape future monetary policies.

Stocks, Economy, Markets