The S&P/TSX composite fell 62.52 points, or 0.18 percent, to close at 35,212.32 on Monday, pulling back from Friday's record finish of 35,274.84 as losses in the energy and materials sectors outweighed gains in financials. Bay Street's retreat came as Wall Street moved the opposite direction: the Dow Jones Industrial Average closed at a record 53,055.91, up 0.29 percent, while the Nasdaq Composite jumped 1.12 percent to 26,121.16 and the S&P 500 added 0.72 percent to 7,537.43, all on renewed buying in artificial intelligence names after a late June pullback in chip stocks.
The divergence is a straightforward sector rotation story, not a signal that Canadian and US equities are decoupling structurally. Gold miners, which drove nearly all of Friday's 308 point rally on the back of a weak US jobs report, gave back a portion of those gains Monday as profit taking set in. Energy names lagged as WTI crude held near its lowest level in more than four months.
Why Materials Gave Back Friday's Gains
Friday's rally was concentrated almost entirely in gold mining names, which responded to a US non-farm payrolls report showing only 57,000 jobs added in June against a 110,000 forecast, a miss that lowered expectations for near term Federal Reserve tightening and lifted bullion. The August gold contract closed Friday up $61.60 at $4,187.30. Monday saw a partial reversal, with the contract still firm at $4,167.50, up $41.80 on the session, but the sector's index level pulled back after Friday's concentrated move, a pattern consistent with profit taking rather than a change in the underlying gold thesis.
The TSX's climb from the low thirty four thousands in April to Friday's record above thirty five thousand two hundred has been driven overwhelmingly by gold, and Monday's pullback is the first real test of how much of that gain holds once profit taking sets in.
The TSX has climbed roughly 1,150 points since mid April, driven largely by gold miners, and Monday's pullback reflects profit taking against that advance rather than a change in trend.
The Energy Sector's Problem Is Supply, Not Demand
TSX energy names underperformed Monday as WTI crude settled at $68.55, down 13 cents on the session and trading near its lowest level in more than four months. The mechanism is OPEC+ supply, not weakening demand: the group agreed Sunday to raise output targets by another 188,000 barrels per day starting in August, the fifth consecutive monthly increase, while Saudi Arabia simultaneously cut its official selling price for Arab Light crude to Asian buyers by $11 a barrel, the largest cut on record since 2003.
Iran's Islamic Revolutionary Guard Corps fired on two commercial vessels in the Strait of Hormuz Monday night, according to Axios and CNN, the first serious violation of the June 17 memorandum of understanding between Washington and Tehran. As of Tuesday morning trading, WTI has moved only modestly above $69, still deep inside its four month low range. Canadian energy equities should be expected to open reflecting that same soft price level rather than a geopolitical risk premium, unless vessel traffic data over the coming days shows an actual reduction in shipping through the strait.
What to Watch at the Open
Financials were the one bright spot in Monday's TSX session, continuing to benefit from a rate environment where the Bank of Canada is priced at roughly 95 percent to hold at 2.25 percent on July 15, a decision the Bank now enters blackout on today without being able to comment on the Hormuz development. The Government of Canada five year yield closed at 3.03 percent Monday, having eased three basis points, a level consistent with continued support for rate sensitive sectors including banks and utilities, provided the Hormuz situation does not escalate further during the blackout window.