S&P/TSX Composite Rallies Over One Percent as U.S. Markets Surge

By The Canadian Press

TORONTO — Canada's main stock index experienced a significant gain of over one percent on Friday, primarily driven by the robust performance of financial and industrial stocks. The positive momentum was mirrored in U.S. stock markets, which also saw a notable rally in the later part of the afternoon.

The S&P 500 and Nasdaq indices each climbed by 1.6 percent, while the Dow Jones industrial average rose by 1.4 percent. This uplift came after a slight dip earlier in the day, following the release of a recent economic report in the United States that indicated a slowdown in inflation and a decline in consumer spending for January.

This trend in economic data is concerning, as noted by Pierre-Benoît Gauthier, vice-president of investment strategy at IG Wealth Management. He mentioned, "The data is getting weaker and weaker. Everything that comes out is just a big disappointment." According to Gauthier, the anticipation of tariffs has also contributed to a change in market sentiment.

Despite these concerns, weaker economic data might provide the U.S. Federal Reserve with the flexibility to continue reducing the main interest rate later this year to support economic growth. So far this year, the Fed has kept interest rates unchanged after significant cuts in late 2023, largely due to worries about persistent inflation.

In New York, the Dow Jones industrial average rose by 601.41 points to close at 43,840.91. The S&P 500 index increased by 92.93 points, ending at 5,954.50, while the Nasdaq composite climbed 302.86 points to finish at 18,847.28.

On the Canadian side, the S&P/TSX composite index closed with a gain of 265.21 points at 25,393.45.

Next Tuesday, a significant development is set to occur as U.S. President Donald Trump is expected to implement broad tariffs on Canadian goods. In retaliation, Ottawa has indicated plans to impose its own tariffs on various U.S. imports.

These impending tariffs have further impacted market sentiment, leading Gauthier to remark, "The whole growth story has been put into question." This pullback is particularly evident in the tech sector, where valuations have surged due to excitement surrounding advancements in artificial intelligence technology.

Semiconductor giant Nvidia, central to the AI boom, reported earnings that exceeded expectations this week, consistent with its previous performance. Nevertheless, the stock experienced a decline following the announcement, highlighting that even strong results may not suffice for a rally in the current market climate. On Friday, Nvidia managed to recover slightly, gaining 3.9 percent.

In a favorable twist, the latest report on Canadian economic growth surprised analysts by showing fourth-quarter GDP growth of 2.6 percent on an annualized basis. Despite the Canadian economy facing challenges primarily due to higher interest rates, this positive data contrasts with the current situation in the U.S.

However, it is important to note that this data predates Trump's presidency, and economists caution that the upcoming tariffs could adversely affect sentiment and spending on both sides of the border. Gauthier expressed hope for the tariffs to remain below 25 percent and to be temporary, stating, "Everything is riding on the tariff talk next week ... there’s still a lingering feeling in the market that this will get resolved at the last second, but I’m not so sure this time."

The Canadian dollar traded at 69.26 cents US, slightly down from 69.34 cents US on Thursday. In commodities, the price of April crude oil declined by 59 cents, settling at US$69.76 per barrel. The April natural gas contract fell by 10 cents to end at US$3.83 per mmBTU. April gold experienced a decrease of US$47.40, closing at US$2,848.50 an ounce, while the May copper contract dropped by seven cents, finishing at US$4.51 a pound.

— With files from The Associated Press

This report was published on February 28, 2025.

Stocks, Markets, Economy