Canada’s main stock index rose to another record high on Friday as shares of e-commerce company Shopify jumped and investors shrugged off downbeat domestic economic data. The S&P 500 held steady, with interest rate-cut expectations rising as the U.S. government shutdown went on for a third day.
Toronto’s S&P/TSX composite index ended up 311.09 points, or 1%, at 30,471.68, its sixth straight day of gains and eclipsing Thursday’s record closing high.
For the week, the index was up 2.4%.
“From a big picture point of view, we seem to be back to a situation where bad news for the economy is good for the markets,” said Elvis Picardo, a portfolio manager at Luft Financial, iA Private Wealth. “On the Canadian side, we had pretty soft data but that was shrugged aside.”
Canada’s services economy contracted at a steeper pace in September as businesses shed jobs and outstanding work sank to a five-year low, S&P Global’s Canada services PMI data showed.
A soft economy spurred the Bank of Canada to cut interest rates last month to a three-year low of 2.50%. Money market pricing has leaned toward further easing this month.
The technology sector rose 1.5%. Shopify’s shares were up 6.5%, notching an all-time closing high. They also surpassed the record intraday peak from November 2021.
“Shopify could be benefiting from enthusiasm for anything AI-related,” Picardo said. “We don’t have too many companies with that pedigree in Canada.”
OpenAI has recently introduced a feature that would allow users to make purchases through ChatGPT, in partnership with Shopify and Etsy.
Technology accounts for 11.5% of the TSX’s weighting, far less than the U.S. benchmark S&P 500 where technology represents 50% of the index. Industrials added 1.1% and energy was up 1%. The price of oil settled 0.7% higher at US$60.88 a barrel, clawing back some of this week’s decline. Eight OPEC+ countries are likely to further raise oil output on Sunday.
Nine of 10 major sectors ended higher. The exception was healthcare, which lost 1%.
According to preliminary data, the S&P 500 gained 0.47 points, or 0.01%, to end at 6,715.82 points, while the Nasdaq Composite lost 63.19 points, or 0.28%, to 22,780.86. The Dow Jones Industrial Average rose 242.00 points, or 0.52%, to 46,761.72.
The U.S. government shutdown dragged on for a third day. Investors were still able to digest a survey by the Institute for Supply Management, which showed the services employment index contracted for the fourth consecutive month in the U.S. The news underscored the case for more interest rate cuts from the Fed.
“It certainly feels like momentum is on the side of investors over the last few days,” said Mona Mahajan, head of investment strategy at Edward Jones.
It seems like “the market probability of a Fed rate cut has actually gone up since the shutdown began,” she said. “Maybe that’s because there’s the potential impact on the economy or some weaker jobs data this week or this morning’s ISM data... the expectation is we’re still in this environment where the Fed is going to cut rates.”
The market has historically been mostly unaffected by shutdowns but some strategists said that a longer shutdown could create more uncertainty for investors and for Federal Reserve policymakers.
“The market generally looks past government shutdowns because they don’t usually last long and they don’t have a longer-term negative impact on the economy,” said Anthony Saglimbene, chief market strategist at Ameriprise Financial in Troy, Michigan.
“But the longer it goes... it means the data collection for really important reports could get delayed, or it could cloud some of the data that we will eventually get because the data collection wasn’t happening over an extended period.” Chicago Fed President Austan Goolsbee said he was hesitant to commit to a series of rate cuts with inflation still running above the target.
Shares of USA Rare Earth rose after CEO Barbara Humpton told CNBC the company was “in close communication” with the White House.
Reuters, Globe staff