The S&P/TSX Composite Index, S&P 500 and Nasdaq all reached new record closing highs on Monday, as hopes for global trade deals and possible rate cuts eased investor uncertainty. The equity gains came as the Canadian dollar recouped all the ground it lost in a volatile pre-weekend move when U.S. President Donald Trump said he was halting trade talks with Canada.
Both U.S. stock indexes ended the quarter with double-digit gains while Canada’s main index rose 7.8% in the three-month period. The TSX has now gained for four straight quarters, and is up 8.6% since the start of the year.
The TSX has been resilient thanks to expectations that a Canada-U.S. trade deal is looming and its favourable valuations coming into the year. Its strong performance underscores the reality that the index isn’t the best representation of the underlying Canadian economy, which continues to struggle, said Robert Kavcic, senior economist at BMO Capital Markets.
The Canadian benchmark, with its heavy representation of mining stocks, has been aided by strength in gold. Meanwhile, firm performance by banks and consumer stocks has helped to offset weakness in the energy sector.
“BMO’s strategy team continues to like Canadian equities given current valuations and a low earnings expectations bar. We just need some of this strength to bleed into the real economy,” Kavcic said in a note.
The S&P/TSX composite index on Monday ended up 164.79 points, or 0.6%, at 26,857.11, eclipsing the record closing high it posted on Thursday.
The materials group rose 1.6% as the price of gold climbed. Heavily weighted financials added 0.6% and technology ended 0.9% higher. Of 10 major sectors, only energy ended lower. It lost 0.5% as the price of oil settled 0.6% lower at US$65.11 a barrel, weighed by easing Middle East risk and a possible OPEC+ output increase in August.
The Canadian dollar, meanwhile, rose as the U.S. said it will resume trade negotiations with Canada immediately after Ottawa scrapped its digital services tax targeting U.S. technology firms. Trump on Friday had halted the talks in response to the digital levy.
The loonie was trading 0.3% higher by late day at 1.3635 per U.S. dollar, or 73.34 U.S. cents, extending its recovery from an intraday low of 1.3758 on Friday. For June, the currency was up 0.8%. That’s its fifth straight month of gains, the longest such stretch since 2020.
“Anyone who sold the Canadian dollar on Friday learned another tough lesson that Trump headlines are to be faded,” said Adam Button, chief currency analyst at ForexLive. “The market is increasingly eager to buy the dip on any opportunity and that includes selling the (U.S.) dollar.”
On Wall Street, the S&P 500 gained 10.57% during the second quarter, the Nasdaq rose 17.75%, and the Dow climbed 4.98%. The Russell 2000 Small Cap index rose 8.28% in the quarter.
Still, the three main indexes posted their weakest first-half performances since 2022, as the uncertainty around trade policy has kept investors wary during the year, with tensions peaking after Trump disclosed widespread tariffs on April 2.
Trade deals with China and the UK have fueled optimism that an all-out global trade war can be minimized, with hopes for more deals to be reached before Trump’s July 9 trade deadline.
The end of the quarter was also influenced by managers tweaking their portfolios to look more attractive at quarter-end.
“Animal spirits seem to have taken hold here,” said Roy Behren, co-president of Westchester Capital management fund. “It is also quite common for the last couple of days of a quarter to see strength because of the window dressing.”
U.S. Treasury Secretary Scott Bessent warned on Monday that countries could still face sharply higher tariffs on July 9 even if they are negotiating in good faith, and any potential extensions will be up to Trump. Meanwhile, U.S. Senate Republicans will try to pass Trump’s sweeping tax-cut and spending bill, despite divisions within the party about its expected US$3.3 trillion hit to the US$36.2 trillion national debt. Trump wants the bill passed before the July 4 Independence Day holiday.
Key U.S. economic data releases this week include monthly non-farm payrolls and the Institute for Supply Management’s survey on manufacturing and services sectors for June.
Several U.S. central bank officials including Federal Reserve Chair Jerome Powell are scheduled to speak later this week.
The Canadian stock market will be closed Tuesday for a holiday, and American markets are closed on Friday.
A raft of soft economic data and expectations that Trump will replace Powell with someone dovish have pushed up bets of rate cuts from the Fed this year.
On Monday, nine of the 11 S&P indexes closed up. The Dow Jones Industrial Average rose 275.50 points, or 0.63%, to 44,094.77, the S&P 500 gained 31.88 points, or 0.52%, to 6,204.95 and the Nasdaq Composite gained 96.28 points, or 0.48%, to 20,369.73.
Shares of big U.S. banks rose after most cleared the Federal Reserve’s annual “stress test,” paving the way for billions in stock buybacks and dividends.
Leading the S&P 500 were Hewlett Packard Enterprise, up 11.1 %, First Solar up 8.8 %,and Juniper Networks up 8.45 %.
Volume on U.S. exchanges was 17.12 billion shares, compared with the 18.23 billion average for the full session over the last 20 trading days.
Reuters, Globe staff