Canada’s main stock index fell on Monday and the loonie notched a near three-week high, as investors weighed the uncertain timing of a potential shift in Canadian political power after Prime Minister Justin Trudeau announced plans to resign.
The S&P/TSX composite index ended down 73.75 points, or 0.3%, at 24,999.79, after three straight days of gains. On Wall Street, both the S&P 500 and the Nasdaq Composite on Monday rose to more than one-week highs.
Trudeau said he would step down in the coming months after nine years in power and added that parliament would be prorogued, or suspended, until March 24.
“The TSX isn’t doing too much because you could say this puts us into limbo for the next few months,” said Greg Taylor, portfolio manager at Purpose Investments. Proroguing parliament during the first days of office of the Trump administration could potentially add to the risk that investors face, he said.
U.S. President-elect Donald Trump is due to take office on Jan. 20 and has threatened to impose steep tariffs on trading partners, including a 25% tariff on imports from Canada.
Trump Monday denied a Washington Post report that said his aides were exploring tariff plans that would only cover critical imports.
Polls show the Liberals will badly lose to the official opposition Conservatives in an election that must be held by late October. The Conservatives are seen as more market friendly by some analysts.
Canadian data Monday showed that the services economy deteriorated for the first time in three months in December as a postal workers’ strike weighed on activity.
Eight of the 10 major sectors on the Toronto market lost ground, including a decline of 1.6% for consumer staples.
Among the gainers was energy. It rose 1% as the price of oil touched its highest level since mid-October before settling 0.5% lower at US$73.56 a barrel.
The Canadian dollar was trading 0.8% higher at 1.4330 to the U.S. dollar, or 69.78 U.S. cents, as the greenback lost ground against a basket of major currencies.
In the U.S. equity market, gains in the S&P 500 and the Nasdaq were boosted by a rally in semiconductor stocks.
The Dow Jones Industrial Average fell 25.57 points, or 0.06%, to 42,706.56, the S&P 500 gained 32.91 points, or 0.55%, to 5,975.38 and the Nasdaq Composite gained 243.30 points, or 1.24%, to 19,864.98.
Seven of the 11 S&P 500 sectors ended lower, but communication services and tech stocks climbed 2.13% and 1.44%, respectively.
“What we’re seeing is more of what happened last year, which is a rally concentrated on the largest stocks,” said Michael Green, portfolio manager at Simplify Asset Management, adding that flows from 401(k) retirement plans are helping drive stocks higher.
Chipmakers got a boost from Microsoft’s plan to invest US$80 billion to develop artificial-intelligence-enabled data centers, as well as Foxconn’s forecast-beating fourth-quarter revenue.
Nvidia rose 3.43%, Advanced Micro Devices gained 3.33% and Micron Technology was up 10.45%. The Philadelphia Semiconductor index jumped 2.84%.
Automakers gained, with Ford rising 0.40% and General Motors adding 3.40%.
“[Trump] did come out and say that he’s not going to water down his tariff plan, but the seed has been planted that the Trump administration’s tariff policies won’t be quite as shocking as people originally feared,” said Brian Jacobsen, chief economist at Annex Wealth Management.
Automobile manufacturers are considered the most vulnerable to tariffs imposed on U.S. trade partners, given their vast supply chains.
Leading to Trump’s Jan. 20 inauguration, investors are seeking insights into his policies, which are broadly seen as beneficial for corporate America as well as the U.S. economy.
Citigroup moved 2.45% higher after a bullish rating from Barclays. An index tracking banks rose 0.22%. Fed Vice Chair for Supervision Michael Barr, who has sought a range of strict rules on the nation’s biggest banks, said he will resign.
In a week packed with economic data and speeches from U.S. Federal Reserve officials, investors will look for clues on the pace of monetary policy easing this year. Later in the week, the focus will be on a monthly payrolls report.
While Trump’s proposals could boost corporate profits and energize the economy, they also risk driving up inflation. Fed Governor Lisa Cook was the latest among a number of policymakers to caution that inflation risks remain in the new year.
Advancing issues outnumbered decliners by a 1.01-to-1 ratio on the NYSE and a 1.1-to-1 ratio on the Nasdaq. The S&P 500 posted eight new 52-week highs and eight new lows, while the Nasdaq Composite recorded 97 new highs and 39 new lows. Volume on U.S. exchanges was 17.36 billion shares, compared with the 12.37-billion average over the last 20 trading days.
Markets will be shut on Thursday for a national day of mourning to mark the death of former President Jimmy Carter.
Reuters, Globe staff