TORONTO — Canada's main stock index drifted lower Friday, pulled lower by energy, technology and base metals, while U.S. markets also ended the day down after a busy week of economic data and an interest-rate pause from the central bank.
Markets gave back some of their gains but still finished the week strong, said Mona Mahajan, senior investment strategist with Edward Jones.
“I think we're just taking a bit of a breather before a long weekend here in the U.S.,” she said.
The S&P/TSX composite index was down 51.98 points at 19,975.37.
In New York, the Dow Jones industrial average was down 108.94 points at 34,299.12.The S&P 500 index was down 16.25 points at 4,409.59, while the Nasdaq composite was down 93.25 points at 13,689.57.
The big news item for the week was the Federal Reserve’s decision to hold its key interest rate steady for the first time since it began its tightening cycle last year. While the announcement was largely anticipated Wednesday, the central bank indicated it could raise rates twice more this year to continue its fight against inflation.
The immediate reaction was negative from investors, said Mahajan, but the next day markets were more optimistic as they digested the news and comments from chairman Jerome Powell.
Powell said Wednesday that the central bank sees progress on inflation and “it may make sense for rates to move higher but at a more moderate pace.”
The other big story this week was that the rally in equities, which for a while has been a narrow one, is starting to broaden, said Mahajan.
“We are starting to see a little bit of broadening beyond just the three sectors that were leading the way, which were tech, communications services and consumer discretionary. We’re getting more participation from areas like industrials and materials,” she said.
“I think it reflects a little bit more confidence in the health of the U.S. economy.”
Investors got a mixed bag of economic reports this past week, with inflation cooling in May even as retail sales unexpectedly strengthened, applications for jobless benefits higher than expected, and manufacturing contracting.
Mahajan said the upcoming earnings season is expected to be negative, and she predicts markets will see some volatility in the second half of the year as conditions continue to soften. However, she said it could turn into an opportunity to position in equities and fixed income.
The Canadian dollar traded for 75.77 cents US compared with 75.46 cents US on Thursday.
The August crude contract was up US$1.12 cents at US$71.93 per barrel and the July natural gas contract was up 10 cents at US$2.63 per mmBTU.
The August gold contract was up 50 cents at US$1,971.20 an ounceand the July copper contract was down a penny at US$3.89 a pound.
— With files from The Associated Press
This report by The Canadian Press was first published June 16, 2023.
Companies in this story: (TSX:GSPTSE, TSX:CADUSD=X)
Rosa Saba, The Canadian Press
Note to readers: This is a corrected story. An earlier version incorrectly spelled Mona Mahajan's name.
