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The S&P/TSX composite index rose 94.43 points to 35,800.89 on Friday, but finished the week lower as investors weighed Bank of Canada comments and retail sales data.
TORONTO — Canada's main stock index was in positive territory on Friday, with the S&P/TSX composite index rising 94.43 points to close at 35,800.89, though it still ended the week slightly lower than where it began. The session wrapped up a week in which investors monitored a speech by Bank of Canada governor Tiff Macklem and new economic data that painted a mixed picture of the Canadian economy.
Technology Stocks Lead Gains
Adam Ludwick, director of asset allocation at NEI Investments, said technology stocks were a bright spot for the TSX this week, gaining about nine per cent. His comments came as the index managed a positive close on Friday despite the broader weekly decline.
The tech sector's strength provided some support as investors weighed competing signals on the direction of interest rates and economic growth.
Bank of Canada Flags Trade Uncertainty
Investors also focused on a Monday speech by Bank of Canada governor Tiff Macklem, who said the unpredictability of U.S. trade policy has heightened uncertainty for businesses and could set back the recent progress of the Canadian economy. Macklem noted that businesses had spent the last year adapting to higher tariffs and that growth had resumed, but that was before the latest escalation in the trade dispute with the United States.
Trump's latest tariffs affect nearly $28 billion worth of Canadian goods. Macklem said if the new U.S. tariffs remain in place, the rate of growth for the economy could be roughly halved in the fourth quarter to below one per cent. He added that it is not going to be easy, but the economy is showing resilience.
Ludwick said the speech reflected a more nuanced view of the Canadian economy compared with the central bank's September decision to hold interest rates. The central bank kept its key rate on hold at 2.25 per cent earlier this month, but financial markets have raised the odds of an interest rate hike later this year in recent weeks. He said the speech highlighted the idea that the central bank does not want to be too late to hike rates and inflation proves to be stubborn.
Ludwick also pointed to the Middle East conflict as the main driver due to the price of oil. He said if there is an October rate hike, that would shift some things in Canada, and right now the market is pricing that as a coin flip. He noted that shifting headlines regarding the latest developments in the U.S. war with Iran also affected oil prices this week and had cascading effects on Canada.
Retail Sales and GDP in Focus
On Thursday, Statistics Canada said retail sales fell 0.7 per cent to $73.7 billion in July as sales at general merchandise retailers slowed. However, the agency said its early estimate for August pointed to a gain of 1.3 per cent for that month, though it cautioned the figure would be revised.
Ludwick said it is nice to see the retail sales bounce, but there are other overhangs that are impacting investor sentiment a little bit more than that.
Next week on Tuesday, Statistics Canada will release its report for gross domestic product for July. Ludwick said a softer print there could be concerning. He warned of a difficult dynamic where growth is slowing but inflation is persistent, an environment that is not ideal for equities or for the economy.
The agency's preliminary estimate released last month suggested real GDP was essentially unchanged in July as increases in the real estate and rental and leasing sector and professional, scientific and technical services were offset by decreases in retail trade and manufacturing.
New York Markets and Commodities
In New York on Friday, the Dow Jones industrial average was up 478.64 points at 51,828.62. The S&P 500 index was up 39.28 points at 7,743.41, while the Nasdaq composite was up 129.34 points at 27,068.72.
The Canadian dollar traded for 70.70 cents US compared with 70.74 cents US on Thursday. The November crude oil contract was down US$2.20 at US$92.41 per barrel. The December gold contract was up US$23.20 at US$4,321.20 an ounce.
S&P/TSX Composite Bank Of Canada Tiff Macklem Canadian Economy Statistics Canada Retail Sales U.S. Tariffs
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