TSX rises more than 500 points to finish a volatile week, U.S. markets hit new highs

TORONTO – Canada’s main stock index rose more than 500 points Friday to close out a volatile week as investors narrowed in on bond yields and the health of the Canadian economy. 

The S&P/TSX composite index was up 519.24 points at 35,664.62. 

Derek Benedet, a portfolio manager at Purpose Investments, said that trading on the TSX has been choppy over the past week but was finishing “pretty flat overall.” 

“It’s been some hints of some green shoots, but then Wednesday was really a tough day in the markets, and obviously everything’s trading off bond yields.” 

On Wednesday, the TSX fell more than 600 points.

“The fear for most investors is the fact that bond yields are rising; the price of money is increasing,” Benedet said. 

Also this week, investors digested the latest employment figures for the Canadian economy that showed the labour market stalled for a second month in a row in September, pouring some cold water on recent calls for interest rate hikes from the Bank of Canada.

Statistics Canada said Friday the economy lost 68,000 positions in September, coming off a loss of 42,000 roles in August. Economists had expected a gain of 9,200 jobs in the month. The unemployment rate edged up a 10th of a point to 6.5 per cent. 

Benedet said the report was a “big negative surprise.” 

He noted that the dollar dropped below 70 cents US for the first time in a while on the news.

The loonie traded for 70.07 cents US on Friday, compared with 70.22 cents US the day before.

“There’s concern about Canada; I’m not saying recession, but there’s growth concerns and they are legitimate. But when you look at what was being hurt this week in Canada, they’re some of the cyclicals like industrials, financials, those are the areas where they’re getting harder hit,” he said. 

The September jobs figures mark the Bank of Canada’s last look at the labour market before its next interest rate decision set for Oct. 28. The central bank’s policy rate has been at 2.25 per cent for nearly a year. Most economists consider that rate to be slightly stimulative to the economy.

“A hike in October is likely off the table now given the shaky jobs number … it’s almost evenly split whether the market is expecting a hike at all this year,” Benedet said. 

Given the current state of the market, he said he has become more defensive. 

“We recently and over the past few months, have been tilting a little bit more toward fixed income. Given where bond yields are, the yields are attractive, the stock markets are at an all-time high, valuations are not super elevated, but they’re certainly high, so we do have some concerns,” he said. 

Looking ahead to next week, Benedet said gold prices will be influential in determining the direction of the TSX, given its outsized weighting. 

“In Canada next week, what looks interesting is gold … you had a big breakout at the end of July, August was a fantastic month, September was a horrible month for gold,” he said. 

“That US$4,000 level has really held on, so that’s proven to be some pretty decent support.”

The U.S. stock market finished its record-setting week with gains on Friday. 

The S&P 500 index was up 46.18 points at 7,811.54. It climbed 0.6 per cent for its first gain since setting its all-time high three days earlier.

The Dow Jones industrial average was up 423.31 points at 51,654.95, while the Nasdaq composite was up 172.83 points at 27,366.17.

The November crude oil contract was up 36 cents US at US$91.85 per barrel. 

The December gold contract was up US$59.30 at US$4,216.30 an ounce.   

— With files from The Associated Press

Companies in this story: (TSX: GSPTSE, TSX: CADUSD)