Trader Michael Capolino works on the floor of the New York Stock Exchange on Friday.Richard Drew/The Associated Press
The Canadian dollar sold off Friday afternoon as U.S. President Donald Trump, in a Truth Social posting, said he is terminating all discussions on trade with Canada over Ottawa’s plans to push ahead with a digital services tax at the end of the month.
The TSX was also bruised, ending in the red after earlier Friday reaching a record intraday high. Stocks on Wall Street came off their highs on the news as well, but still ended in positive territory. Both the S&P 500 and Nasdaq closed at all-time highs.
The loonie fell about half a cent to 72.68 cents US after Trump’s comments. It later retraced some of those losses, trading near 72.92 by 4pm ET.
“This Trump post about terminating all discussions with Canada has seen the floor fall out from underneath the Canadian dollar,” said Erik Bregar, director, FX & precious metals risk management at Silver Gold Bull.
Canadian bond yields ticked lower across the curve, even as U.S. Treasury yields rose - a signal of investor unease about the domestic economy. The 2-year yield was down about 2 basis points in late afternoon trading. This came as the market priced in modestly higher odds of the Bank of Canada cutting interest rates at its next policy announcement on July 30. Implied probabilities in swaps markets now put rate cut odds next month at 42%, up from 37% prior to Trump’s social media post, according to LSEG data.
Trump said Washington will notify Canada about new tariff rates required “to do business with the United States” within the next week.
Prime Minister Mark Carney has been negotiating in private with Trump and announced earlier this month they are pursuing a deal to end the stop-and-go tariff war. Ottawa’s digital services tax on big tech companies is set to apply for the first time on June 30, retroactive for three years — leaving U.S. companies with a $2 billion US bill due at the end of the month.
The Dow Jones Industrial Average rose 432.43 points, or 1.00%, to 43,819.27, the S&P 500 gained 32.05 points, or 0.52%, to 6,173.07 and the Nasdaq Composite gained 105.55 points, or 0.52%, to 20,273.46.
All three major U.S. stock indexes posted weekly gains. Upon reaching its record closing high, the tech-heavy Nasdaq confirmed it entered a bull market when it touched its post “liberation day” trough on April 8.
The blue-chip Dow remained 2.7% below its record closing high reached on December 4.
“This market’s been pretty resilient,” said Chuck Carlson, chief executive officer at Horizon Investment Services in Hammond, Indiana. “Investors are riding momentum and looking for breakouts.”
“They don’t want to get caught on the wrong side of this thing,” Carlson added. “Many investors already have missed out. And now you have the S&P flirting with an all-time high.”
The Personal Consumption Expenditures report from the U.S. Commerce Department showed consumer income and spending unexpectedly contracted in May. And while tariffs have yet to affect price growth, inflation continues to hover above the Fed’s 2% annual inflation target.
A separate report from the University of Michigan confirmed consumer sentiment has improved this month, but remains well below December’s post-election bounce.
Financial markets have priced in a 76% likelihood that the Fed will implement its first rate cut of the year in September, with a smaller, 19% probability of a rate cut coming as soon as July, according to CME’s FedWatch tool.
Helping to fuel Wall Street’s gains Friday: Washington and Beijing reached an agreement to expedite rare-earth shipments from China to the U.S., according to a White House official, well ahead of the July 9 expiration of the 90-day postponement of U.S. President Donald Trump’s “reciprocal” tariffs.
Additionally, U.S. Treasury Secretary Scott Bessent said the administration’s trade deals with 18 of the main U.S. trading partners could be done by the September 1 Labor Day holiday.
The mood wasn’t as bullish on Bay Street. The S&P/TSX composite index ended down 59.63 points, or 0.2%, at 26,692.32, after posting a record closing high on Thursday.
In Canadian economic news Friday, GDP contracted by 0.1% in April from March as U.S. tariff uncertainty weighed on the goods-producing sector. Preliminary data pointed to a further decline in activity for May.
For the week, the index was up 0.7% as cooling Middle East tensions boosted investor sentiment.
On Friday, the TSX materials group fell 2.8% as easing of U.S.-China trade tensions reduced the appeal of safe-haven gold.
Energy also ended lower, falling 0.5%, as the price of oil posted a steep weekly decline.
Seven of 10 major sectors ended higher, with real estate adding 0.7% as long-term borrowing costs fell.
Among the 11 major sectors of the S&P 500, consumer discretionary enjoyed the biggest percentage gain, while energy shares were the laggards. Chipmaker Micron’s MU.O upbeat forecast revived investor confidence in artificial intelligence-related stocks, while Nvidia NVDA.O rose 1.8%, edging closer to $4 trillion market capitalization after reclaiming its position as the world’s most valuable company.
Nike’s shares jumped 15.2% after forecasting a smaller-than-expected drop in first-quarter revenue.
Advancing issues outnumbered decliners by a 1.29-to-1 ratio on the NYSE. There were 347 new highs and 55 new lows on the NYSE. On the Nasdaq, 2,111 stocks rose and 2,342 fell as declining issues outnumbered advancers by a 1.11-to-1 ratio. The S&P 500 posted 35 new 52-week highs and 6 new lows while the Nasdaq Composite recorded 101 new highs and 68 new lows.
Volume on U.S. exchanges was 22.07 billion shares, compared with the 18.27 billion average for the full session over the last 20 trading days.
With files from Reuters and The Canadian Press