The S&P/TSX Composite rose 156 points, or 0.44%, to 35,944.16 on Monday, led by the banks, while December West Texas Intermediate crude fell US$1.51 to settle at US$101.76. The index is up 1.28% over four weeks and remains 3.03% below its August record of 37,069.11. Canadian Press reported that the Dow Jones Industrial Average gained 146.42 points to 52,361.58, the S&P 500 gained 53.09 to 7,676.77 and the Nasdaq composite gained 214.04 to 26,169.38.
The Canadian implication is the Bank of Canada decision on Wednesday at 9:45 a.m. ET. In a Reuters poll of 34 economists, 19 expect a quarter-point hike to 2.50%, and the Monday session shows where the market has positioned: lenders up, producers flat, miners down.
Daily closes for the S&P/TSX Composite over the past five weeks show an index that has gone nowhere in a range of 3.7% while oil has climbed.
There is no observation for October 12 because Toronto markets were closed for Thanksgiving. The dashed horizontal line marks 36,000.
Why Banks Led While Crude Fell
CIBC rose 1.46%, Bank of Montreal 0.91%, Toronto-Dominion 0.68% and Scotiabank 0.60%, according to Trading Economics. The gains are consistent with a market treating a Wednesday hike as a margin positive for lenders, although a higher rate also raises credit risk at a time when Canada lost 68,000 jobs in September.
Energy did not follow crude lower. Canadian Natural Resources rose 0.16% and Suncor 0.24% even as December WTI fell 1.46%, according to Trading Economics. The relationship between the oil price and Canadian producers has been loose all month, which is the point made in Tuesday Geopolitical desk analysis of the Hormuz disruption.
Materials were the weak spot. Agnico Eagle fell about 0.5% ahead of its earnings report on Wednesday, and other miners declined, even though December gold rose US$30.50 to US$4,038.40 an ounce.
What the Five-Week Range Says
The index closed between 35,041.86 on October 7 and 36,335.61 on September 22 in the 26 sessions charted, a spread of 3.7%. Monday close is 2.6% above that low and 1.1% below that high. Over the full period the index is up 0.38%, from 35,806.65 on September 18.
That is a flat tape against a Brent rally of 11.0% since September 28 in the Investing.com series. The index rose in 14 of the 25 sessions and fell in 11, with a best day of +1.55% on October 15 and a worst day of -1.70% on October 7.
Friday closes tell the same story. The index moved -0.02% in the week to September 25, -0.83% to October 2, +0.46% to October 9, +1.44% to October 16 and -1.07% to October 23. No week has moved the index by more than 1.5%, which makes the Monday gain a normal-sized session inside a range that has held for five weeks.
The pattern matters for Wednesday. A market that has absorbed an 11% rise in Brent without breaking its range is not pricing a shock, and a Bank of Canada decision that differs from the 19 of 34 economists who expect a hike would put that range to its first scheduled test.
The Dollar and Gold Into Wednesday
The Canadian dollar traded at 71.30 US cents on Monday, down 0.22% from 71.46 cents on Friday, as crude eased. The move is small, and it came on a day when December WTI fell 1.46%.
Gold rose to US$4,038.40 an ounce while miners fell, which separates the metal from the equities that mine it. Agnico Eagle reports Wednesday, the same morning as the Bank of Canada.
What Tuesday and Wednesday Set Up
December S&P/TSX futures were up 0.01% at 6:19 a.m. ET on Tuesday, according to ad-hoc-news, pointing to a flat open. U.S. durable goods orders are due at 8:30 a.m. ET with a consensus of 1.3%, and U.S. consumer confidence follows at 10:00 a.m. ET against a prior reading of 81.9.
The Bank of Canada decision and Monetary Policy Report arrive Wednesday at 9:45 a.m. ET, and the Federal Reserve is widely expected to hold later in the week. The decision is the single event most likely to break the 3.7% range in either direction.