The TSX Composite reopened Thursday morning after Canada Day and promptly had to price two sessions worth of American news in one open. It opened higher, lifted by the broad U.S. rally that followed June's weak jobs report, and quickly sorted into the two-lane market the morning research session would have predicted: rate-sensitive sectors advancing sharply while energy names took another leg lower on falling oil. CNQ fell 3.5% in early trading, Suncor lost 3.2%, and the TSX energy sub-index extended its decline toward a fifth consecutive week in the red. The composite itself was up fractionally, a number that flatters a session in which most sectors are positive but the largest weight in the index is under real pressure.
The S&P 500 closed Tuesday at 7,483, and the Dow Jones Industrial Average added 366 points to a second straight record close. Thursday morning the Dow is up a further 365 points, the S&P 500 is adding 81 points, and the Nasdaq is leading all three with a 1.9% gain. The context is the June nonfarm payrolls miss of 57,000 against a 110,000 consensus, paired with the unemployment rate dipping to 4.2% on a shrinking participation rate. The two-year Treasury yield fell after the release, pricing out near-term Fed hike risk. Gold dropped modestly as the safe-haven premium in the previous session unwinds, trading around USD $4,037, or CAD $5,839.
The TSX Sector Divergence
The sector split running through the TSX today is the visible output of a week that produced three distinct inputs: the Warsh Sintra remarks Wednesday that moved markets lower, the jobs print this morning that reversed much of that, and the Doha peace talks outcome that pushed oil to its lowest close since February 27. No single input tells the story in isolation. The TSX's energy sector, which carries roughly 18% of index weight at peak oil prices, has been repricing against WTI's 43% decline from its April peak. The index's financial sector is pricing the opposite signal: a softer labour market that reduces the probability of a near-term rate hike, lifting bank multiples and rate-sensitive names alike.
The 11-sector chart across the composite this morning shows nine green and two red, with energy the dominant red and materials the secondary one as copper and base metals moved lower on demand concern from Asia. Utilities, real estate, and communications services are each up more than 1%, reading the jobs miss as a rate reprieve. Information technology is adding 1.4%, riding the Nasdaq's morning gain.
The TSX reopened to a split tape after sitting out Canada Day. The June jobs miss is lifting rate-sensitive sectors while energy names extend their war premium reversal. Nine of eleven sectors are positive, masking the weight energy names carry in the composite index.
The CAD and the Rate Spread
The Canadian dollar is trading at 0.7047 against the USD, essentially flat on the session, which is itself an interesting result. A U.S. jobs miss of this magnitude would normally weaken the USD and lift the loonie, but the CAD's gains are being held in check by the continued decline in WTI, which has historically been the most reliable driver of short-term CAD moves. The net effect is a pair stuck near 1.42 on the USD/CAD cross, where it has traded since Warsh's hawkish turn in early June widened the Canada-U.S. rate spread. The GoC 5-year yield is holding at 3.14%, while the U.S. 2-year yield fell to 4.12% on the jobs release, compressing the spread slightly but not enough to materially move the pair. The Bank of Canada decides July 15. The market is pricing a hold, and nothing in today's session changes that read.