Canada's main stock index delivered its strongest performance in five weeks, with the Toronto Stock Exchange's S&P/TSX Composite Index closing up 519.24 points, or 1.48%, at 35,664.62. According to reports from Reuters, this marked the index's highest closing level in two weeks and its biggest advance since September 3. For the week, the index added 0.46% after two straight weeks of declines, providing relief to investors who had been concerned about a potential three-week losing streak. The index opened Friday's session at 35,456.72, gaining 311.34 points as broad-based gains emerged across sectors. By noon Friday, the index had spiked 381.72 points, or 1.1%, to 35,527.10, as reported by The Globe and Mail, with the index gaining 208 points, or 0.59%, on the week so far.
The market rally was triggered by weaker-than-expected domestic employment data that reduced expectations for Bank of Canada interest rate hikes. As reported by Reuters, Canada's economy shed 68,300 jobs in September and the unemployment rate edged up to 6.5%, significantly missing analyst forecasts of a jobs gain of 9,200. Statistics Canada confirmed that employment declined by 68,000 (-0.3%) in September with the unemployment rate increasing 0.1 percentage points to 6.5%. Portfolio manager Ben Jang from Nicola Wealth noted that "the market has been quite hawkish and pricing in hikes which now, with such a weak job number, likely means a pause in that process." The Canadian dollar scampered lower 0.24 cents to 70.01 cents U.S., reflecting the market's reassessment of monetary policy expectations.
Market expectations for Bank of Canada policy changes have shifted significantly following the employment data release. According to Reuters, investors now see a 25% chance the BoC would hike at the October 28 policy announcement, down from 40% before the jobs report. However, as reported by Baystreet.ca, odds of an interest rate raise by the BoC at its next meeting dipped to 27% from 40% after the data. Investors still price in a 25-basis-point rate hike at its December meeting, indicating continued uncertainty about future monetary policy direction. The shift in expectations comes as investors reassess the timing of potential rate hikes following the disappointing employment data.
The materials sector led gains with a 2.81% increase as bargain buying emerged for gold after bullion touched a two-month low earlier this week. As reported by Reuters, the energy sector also performed well, rising 1.07% as oil recouped its earlier declines, with US crude oil futures settling 0.4% higher at $91.85 a barrel. The technology sector outperformed with a 2.88% gain, while heavily weighted financials ended 1.21% higher. According to Baystreet.ca, eight of the 12 subgroups gained ground, with gold surging 2.3%, materials up 2.1%, and information technology, up 1.7%. The four gainers were weighed by telecoms, backpedaling 1.6%, consumer staples, slowing 0.2%, and utilities backing off 0.1%. On Friday, all but three of the 12 subgroups gained ground, with gold and materials each surging 2.7%, and information technology up 2.1%, while telecoms declined 2.9%, health-care fell 0.7%, and consumer staples dropped 0.2%.
Aritzia shares surged more than 20% after the apparel retailer topped analyst expectations for second-quarter revenue and profit, helping lift the consumer discretionary sector by 2.66%. According to Baystreet.ca, Aritzia shares surged $22.01, or 18.1%, to $143.90 after the retailer's strong quarterly performance. However, communication services stocks weighed on the index, with Cogeco Communications falling 7.11% and BCE down 5.47%. According to Reuters, US and European telecom stocks also tumbled after SpaceX's acquisition of low-band spectrum heightened concerns over growing competition from satellite-based mobile services. The TSX Venture Exchange regained 10.15 points, or 1.2%, to 877.91, for a drop of 2.66 points on the week, or 0.3%.
