The S&P/TSX Composite fell 0.44% to 35,347.35 on Monday, a loss of 155.30 points, while the S&P 500 rose 0.66% to 7,773.99 and the Nasdaq Composite gained 1.05% to 27,477.31. The Canadian index is now 4.36% below its August 25 close of 36,957.63, and Monday was its third-lowest close in the 35 sessions since August 17.
The gap to the U.S. has a simple source: the TSX has little of the mega-cap technology that carried Wall Street, and it has a lot of energy and banks, which fell. For Canadian portfolios the point is concentration, not the day.
Why Energy and Banks Outweighed Technology
Cenovus fell about 3% after announcing a $5.7 billion deal for Athabasca Oil, and UBS downgraded the stock to Hold, according to BBN Times. Athabasca rose between 13% and 15% in the same session. Suncor fell 1.2% after agreeing to sell offshore assets.
Technology was the offset. Shopify rose 5.7% and the technology sector gained 1.9%, Trading Economics and Finimize reported, tracking Wall Street. The energy sector fell 0.9% as oil eased, with WTI closing at $89.22 and Brent at $100.32 on Investing.com continuous front-month data.
Banks gave back ground as well. Trading Economics reported RBC and TD each down 0.5%, BMO down 0.7% and Scotiabank down 0.9%. BBN Times noted that Canada's services sector contracted for a fourth consecutive month in September, per the S&P Global PMI survey.
The S&P/TSX Composite closed at 35,347.35. The Dow closed at 51,267.90, the S&P 500 at 7,773.99 and the Nasdaq Composite at 27,477.31. The U.S. average is the simple mean of the three U.S. index moves.
Why a 5.315% Treasury Yield Capped the Rally
The U.S. 10-year Treasury yield rose 3.8 basis points to 5.315%, a new 52-week high, according to TheStreet. Equities still rose because Friday's September payrolls report showed just 29,000 jobs added, well below expectations. Daniela Hathorn, senior market analyst at Capital.com, said "Equities are benefiting from Friday's softer US labor market report which saw September payrolls increase by just 29,000, well below expectations."
James "Rev Shark" DePorre said the market has split in two, with the mega-cap AI names among the beneficiaries because they "aren't bothered by higher rates." A market in which only some shares ignore yields is a harder one for an index weighted toward banks and energy.
The Canada 10-year yield was about 3.99% on Vantage Markets data, 133 basis points below the U.S. 10-year. The Bank of Canada held at 2.25% on September 2, while the Federal Reserve raised to a range of 3.75% to 4.00% on September 16.
The U.S. 10-year yield reached 5.315% on October 5, a 52-week high according to TheStreet. The Canada 10-year yield was about 3.99%, per Vantage Markets. The Fed range is 3.75% to 4.00%.
Gold and the Loonie
December gold was quoted at US$4,169.70 an ounce, up US$7.40, Canadian Press reported. The Canadian dollar traded at 70.18 US cents, compared with 70.20 on Friday.
What Comes Next for the TSX
The September Labour Force Survey arrives October 9, with consensus at a gain of 5,000 jobs and a 6.5% unemployment rate, according to Vantage Markets. September CPI follows on October 19, and the Bank of Canada decides on October 28. The index closed 0.55% above its October 1 close of 35,154.76, the lowest close in the series since August 17.