Canada’s main stock index rose on Friday to another record high, led by gains for technology and gold mining shares, as disappointing U.S. and Canadian jobs data spurred investors to raise bets on interest rate cuts. U.S. indexes, however, closed modestly lower.
The S&P/TSX composite index ended up 134.74 points, or 0.5%, at 29,050.63, eclipsing Thursday’s record closing high.
It was the eighth-straight day of gains for the index, the longest daily winning streak since May. For the week, the index was up 1.7%.
“Once again, weak data helped push rate cut expectations,” said Angelo Kourkafas, senior global investment strategist at Edward Jones.
“We saw a universal message across both the U.S. and Canada with employment numbers coming in weaker than expected ... It really cements the market expectations, first of all for the Fed that it is going to resume rate cuts in September, and for the Bank of Canada that the easing cycle is not over.”
Investors see a 90% chance the Bank of Canada will resume its easing campaign on September 17 after leaving its benchmark rate on hold at 2.75% since March, and are fully discounting a rate cut that same day by the Federal Reserve.
Canada’s economy shed 65,500 jobs in August, largely in part-time work, and the unemployment rate climbed to 7.1%. That’s the highest level of unemployment since May 2016 excluding the pandemic.
The S&P 500 ended lower, contributing to the TSX extending its outperformance this year compared to the U.S. benchmark.
“I believe it is the commodity and metals exposure that continues to help the index,” Kourkafas said.
The materials group, which includes metal mining shares, added 2.6% as the price of gold rose to another all-time high.
Technology was up 2.4%, with shares of electronics company Celestica Inc jumping 9.9%. Energy was a drag, falling 1.7%. The price of oil settled 2.5% lower at $61.87 a barrel as expectations grew of higher supply.
U.S. stocks wobbled lower on Friday, as investors questioned whether the U.S. job market has slowed by just enough to get the Federal Reserve to cut interest rates to help the economy, or by so much that a downturn may be on the way.
After rising to an early gain, the S&P 500 erased it and fell 0.3% below the all-time high it set the day before. The Dow Jones Industrial Average dropped 220 points, or 0.5%, after swinging between an early gain of nearly 150 points and a loss of 400. The Nasdaq composite edged down by less than 0.1%.
The action was more decisive in the bond market, where Treasury yields tumbled after the report from the Labor Department said U.S. employers hired fewer workers in August than economists expected. The government also said that earlier estimates for June and July overstated hiring by 21,000 jobs.
The disappointing numbers follow last month’s discouraging jobs update, along with other lackluster reports in intervening weeks, and traders are now betting on a 100% probability that the Fed will cut its main interest rate at its next meeting on Sept. 17, according to data from CME Group. Investors love such cuts because they can give a kickstart to the economy, but the Fed has held off on them because they can also give inflation more fuel.
So far this year, the Fed has been more worried about the potential of inflation worsening because of President Donald Trump’s tariffs than about the job market. But Friday’s job numbers could push the Fed to consider cutting rates in two weeks by a steeper amount than usual, said Brian Jacobsen, chief economist at Annex Wealth Management.
“This week has been a story of a slowing labor market, and today’s data was the exclamation point,” according to Ellen Zentner, chief economic strategist for Morgan Stanley Wealth Management.
Strong hiring for health care jobs had been helping to support the overall market, “but with it now showing some tangible signs of decline, the foundation underneath the labor market seems to be cracking,” said Rick Rieder, chief investment officer of global fixed income at BlackRock.
While the data on the job market is disappointing, it’s still not so weak that it’s screaming a recession is here, and the U.S. economy is continuing to grow. A big question for investors is whether the job market can remain in a balance where it’s not so strong that it prevents cuts to interest rates but also not so weak that the economy falls off.
Uncertainty about that helped lead to Friday’s swings in the stock market. Wall Street needs things to go as hoped because it already sent stock prices to records amid expectations for a Goldilocks scenario where interest rates ease, and the economy keeps chugging along.
On Wall Street, Friday’s heaviest weight was Nvidia, the chip company that’s become the face of the artificial-intelligence boom. It’s been contending with criticism that its stock price charged too high, too fast and became too expensive following Wall Street’s rush into AI, and it fell 2.7%.
Lululemon dropped 18.6% after the yoga and athletic gear maker’s revenue for the latest quarter fell short of analysts’ expectations. CEO Calvin McDonald pointed to disappointing results from its U.S. operation, while Chief Financial Officer Meghan Frank said Lululemon is facing “industrywide challenges, including higher tariff rates.”
Still, more stocks rose on Wall Street than fell. Leading the way was Broadcom, which climbed 9.4% after reporting better profit and revenue for the latest quarter than analysts expected. CEO Hock Tan said customers are continuing to invest strongly in AI chips.
Tesla rose 3.6% after proposing a payout package that could reach US$1 trillion for its CEO, Elon Musk, if the electric vehicle company meets a series of extremely aggressive targets over the next 10 years.
Smith & Wesson Brands jumped 6.5% after the gun maker delivered better results for the latest quarter than analysts expected. CEO Mark Smith said it saw good demand for new products in what’s traditionally a slow season for sales of firearms.
All told, the S&P 500 fell 20.58 points to 6,481.50. The Dow Jones Industrial Average dipped 220.43 to 45,400.86, and the Nasdaq composite slipped 7.31 to 21,700.39..
In stock markets abroad, indexes in Europe lost early gains to turn lower with Wall Street. That followed strength across much of Asia.
The Nikkei 225 rallied 1% in Tokyo after data showed accelerating growth in earnings for Japanese workers. Chinese markets rebounded following three days of decline, with indexes rising more than 1% in both Hong Kong and Shanghai.
In the bond market, the yield on the 10-year Treasury dropped to 4.09% from 4.17% late Thursday and from 4.28% on Tuesday. That’s a notable move for the bond market and could mean lower interest rates are coming for mortgages and other loans.
Canadian bond yields fell across the curve by a similar degree.
Reuters, The Associated Press, Globe staff