The S&P/TSX Composite closed Wednesday at 35,333.78, down 415.92 points or 1.16 percent, a day after setting a record close of 35,749.70. The decline was the sharpest single session move in this desk's current tracking window, driven by a Fed decision that came with three hawkish dissents and a fresh round of missile fire between the US and Iran.
The number that matters for Canadian portfolios is not the index level. It is the split underneath it. Financials, healthcare, and clean technology led the TSX lower, with TD Bank down 3.2 percent and RBC down 3 percent as the 30 year US Treasury yield hit its highest level since 2007. Energy moved the opposite direction on the same session: Canadian Natural Resources rose 4.6 percent and Cenovus gained 4.5 percent on higher crude prices and stronger quarterly results. The index fell. Half of its heaviest sectors did not.
Why the CAD Moved Against the Yield Story
Higher US and Canadian bond yields should, mechanically, support the Canadian dollar by widening the near term rate differential. Wednesday, the loonie firmed anyway, trading at 71.01 cents US versus 70.91 the day before, but the move tracked crude oil's spike rather than the yield move. Oil, not rates, was the dominant currency driver Wednesday, and that ordering matters for how the CAD trades if crude gives back this week's gain the way it has after prior escalation spikes this year.
The Tech Names Moved on a Different Story Entirely
Celestica fell 6.2 percent ahead of Wednesday evening's Microsoft and Meta earnings reports, caught in a broader US chip sector selloff that had nothing to do with the Fed or Iran. Shopify slipped 1.2 percent on the same dynamic. Constellation Software was the exception, rising 3.2 percent on its own momentum. By Thursday morning, Microsoft's earnings beat, driven by Azure growth, had US equity futures pointing higher, a signal that is relevant to Celestica's Thursday open but says nothing about whether Wednesday's Fed or Iran driven moves have resolved.
The TSX's path from Tuesday's record close through Wednesday's decline traces both the magnitude of the reversal and where it sits relative to the past two and a half weeks of trading.
Wednesday's close gave back nearly all of the prior three sessions' gains in a single afternoon. The shaded band marks the session spanning the Fed decision and the overnight strikes on Iran.
What Thursday's Futures Do and Do Not Confirm
US equity futures were higher Thursday morning on Microsoft's earnings, which speaks to Microsoft and its immediate sector, not to whether the Fed's three dissents or Iran's overnight strikes have been resolved. Neither has. A Thursday session that recovers part of Wednesday's decline on the strength of one company's earnings report says nothing about whether TD and RBC's rate sensitivity or Canadian Natural and Cenovus's energy exposure face a different setup than they did Wednesday morning. The sector split that drove Wednesday's session, financials down on yields, energy up on oil, is the one to watch again Thursday, not the headline index number alone.