S&P/TSX Composite Index Declines Over 300 Points Amid U.S. Market Downturn

Rosa Saba, The Canadian Press

TORONTO — On Friday, Canada's main stock index experienced a significant drop of more than 300 points, closing down 305.63 points at 24,767.73. This decline occurred despite an increase in energy stocks, driven by a rise in oil prices. Similarly, U.S. stock markets faced losses as investors reacted to new labor market data released that day.

The decline in U.S. markets was notable, with the Dow Jones Industrial Average falling by 696.75 points to reach 41,938.45. The Nasdaq Composite also experienced a sharp drop, down 317.25 points at 19,161.63, while the S&P 500 index fell by 91.21 points, ending at 5,827.04.

Labor market reports from both Canada and the U.S. showed stronger-than-anticipated figures. In Canada, the economy added 91,000 jobs in December, leading to a decrease in the unemployment rate to 6.7 percent. This positive news suggests strength in the Canadian labor market, according to Ilana Schonwetter, an investment advisor and portfolio manager at Blueshore Financial.

However, Schonwetter cautioned that the Bank of Canada would likely need to see sustained positive changes over the next few months to determine whether this trend is a lasting improvement. She mentioned, "I think that we will need to see another two or three prints to see whether or not there has been a stabilization in that unemployment number or whether it was just an anomaly for that one month."

The Bank of Canada has been aggressively cutting interest rates recently in response to challenges in the economy and labor market, and it is projected to continue this trend into 2025.

Despite the favorable employment data in Canada, the overall market sentiment dipped due to reactions in the U.S. Following the release of similar labor statistics showing increased job growth and a decline in the unemployment rate to 4.1 percent, investors anticipated fewer interest rate cuts from the U.S. Federal Reserve. Schonwetter noted that strong job market data tends to lend itself to a "good news is bad news" scenario, as it gives the Federal Reserve less incentive to act.

"The core around the sell-off today is really around that jobs report, and the consequences of that in the actions of the Federal Reserve," she explained. "It definitely gives them less reason to act."

As the economic data diverges in the U.S. and Canada, Schonwetter stated that the two countries' interest rate policies are expected to continue to differ significantly in 2025. She remarked, "The Bank of Canada is absolutely in a much tougher spot." She highlighted concerns regarding the levels of debt Canadians are carrying, upcoming mortgage renewals, and potential tariffs that may add uncertainty for Canadian investors.

In currency trading, the Canadian dollar was valued at 69.34 cents USD, down slightly from 69.47 cents USD on Thursday.

Meanwhile, in commodity markets, the price of oil saw a rise, with the February crude contract up by US$2.65 to reach US$76.57 per barrel. Similarly, February natural gas increased by 29 cents, settling at US$3.99 per mmBTU. On the other hand, February gold rose by US$24.20 to close at US$2,715 per ounce, whereas the March copper contract decreased by a penny to US$4.30 per pound.

— With contributions from The Associated Press.

Stocks, Market, Economy