S&P/TSX Composite Surges as U.S. Markets Climb Ahead of Inauguration

Rosa Saba, The Canadian Press

TORONTO — On Friday, Canada’s main stock index rose more than 200 points, primarily driven by the strength of the utilities and base metals sectors. Simultaneously, U.S. stock markets experienced a consistent rally on the final trading day before Donald Trump’s inauguration as president.

According to John Zechner, chairman and lead equity manager at J. Zechner Associates, this marked the best week for markets since Trump’s election, reflecting some renewed investor confidence amid ongoing uncertainties.

“The risk-on trade seems to have come back in the past week,” Zechner commented.

The S&P/TSX composite index finished the day up 221.72 points, reaching a total of 25,067.92.

Meanwhile, U.S. markets showed significant gains: the Dow Jones industrial average increased by 334.70 points, closing at 43,487.83. The S&P 500 index climbed 59.32 points, reaching 5,996.66, and the Nasdaq composite rose by 291.91 points to 19,630.20.

The surge in equities was largely supported by positive earnings reports from major U.S. banks and growing optimism regarding several of Trump’s proposed policies, including tax cuts. Additionally, favorable data on U.S. inflation earlier in the week rekindled hopes for potential interest rate cuts by 2025.

Prominent technology stocks such as Alphabet, Tesla, and Nvidia were among those propelling the U.S. markets higher on Friday.

As Trump’s inauguration approached on Monday, concerns lingered about the tariffs he is expected to implement, which could potentially increase inflationary pressures, particularly as the economy demonstrates resilience. However, expectations for interest rate cuts in 2025 seem to be diminishing.

“Unless the economy really starts to break, inflation rates are not dropping,” Zechner noted. “There are numerous unknowns.”

In Canada, investor anxiety heightens as they await news about the potential introduction of tariffs next week. Trump’s bold pledges and threats have many uncertain about his next steps.

“When it comes time to deliver, it’s a different environment than it was eight years ago,” Zechner stated. “The market is holding up relatively well, but Canada faces likely more economic negatives compared to the U.S.”

Given the relative weakness of the Canadian economy, the Bank of Canada is anticipated to continue cutting rates, although Zechner emphasized that this places the bank in a challenging position.

“As they widen that gap with U.S. rates, which are already significant, it pressures the Canadian dollar,” he added.

The Canadian dollar traded at 69.28 cents US, down from 69.50 cents US on Thursday. The March crude oil contract fell 46 cents to $77.39 per barrel, while the February natural gas contract decreased by 31 cents to $3.95 per mmBTU. In precious metals, the February gold contract dipped $2.20 to $2,748.70 per ounce, and the March copper contract lost seven cents to $4.37 per pound.

— With files from The Associated Press

This report by The Canadian Press was first published Jan. 17, 2025.

Companies in this story: (TSX:GSPTSE, TSX:CADUSD)

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