The S&P/TSX Composite closed Friday at 35,788.18, down 185.27 points or 0.52%, its lowest close since October 14. The index has given back 536.81 points in two sessions, after closing at 36,324.99 on October 21.
The Bank of Canada decides on Wednesday, and the market is leaning toward a hike. LSEG data showed nearly 78% odds of an increase as of Friday afternoon. The U.S. Federal Reserve also announces a decision that day.
Friday Split the Index in Two
Energy was the only major sector to rise, gaining 2.1% as the December crude contract added US$3.80 to settle at US$103.27. Suncor rose about 2.6% and Canadian Natural Resources about 2.2%.
Almost everything else fell. Financials lost 0.9%, with Manulife down 2.9%. Gold and silver miners declined as the December gold contract dropped US$52.50 to US$4,007.90, and Agnico Eagle and Barrick each fell about 1.3%.
Thursday had the same shape in a different sector. The index lost 351.54 points, or 0.97%, to close at 35,973.45 in a decline led by materials, according to Kalkine.
The index has traded in a closing range of 1,283.13 points since October 5, and Friday left it 536.81 points under the October 21 high and 746.32 points over the October 7 low.
Closing levels of the S&P/TSX Composite for the 14 sessions from October 5 to October 23. The Toronto exchange was closed October 12 for Thanksgiving. The low close came on October 7, when the index fell 607.65 points in a decline led by basic materials, and the high came on October 21.
What Drove It: AI Spending and an Oil Bet on the Midterms
Allan Small of iA Private Wealth said worries about AI spending and a move in oil on expectations of renewed conflict after the U.S. midterms drove Friday trading. He cited comments from President Donald Trump as part of the oil story.
Wall Street fell as well. The S&P 500 closed at 7,623.68, down 39.75 points or 0.52%, the Dow Jones Industrial Average lost 652.82 points to 52,215.16, and the Nasdaq Composite slipped 53.52 points, or 0.21%, to 25,955.34.
The Canadian dollar traded at 71.46 U.S. cents, up from 71.32 cents on Thursday. Brent crude was about US$114.50 on October 25, according to Al Jazeera, so the oil backdrop heading into Monday is firm.
The Wednesday Setup
Small argued that a rate hike would be a mistake. The market does not agree: nearly 78% odds as of Friday afternoon price a hike as the likely outcome, and a decision to hold would be a surprise.
The base case for the week is an index that trades on three inputs: crude, the Bank of Canada on Wednesday, and the Fed on the same day. Energy rose on Friday while financials and gold miners fell, and whether that split repeats is the pattern to watch at the open.
No session data exist yet for Monday. The first read comes from the energy names after the weekend oil move, then from the financials, which fell 0.9% on Friday. A close back above 36,000 would reverse most of the two-day loss, and a close under the October 14 level of 35,584.46 would put the October 7 low of 35,041.86 back in view.