TORONTO — North American stock indexes capped off a strong week with the Dow Jones industrial average and S&P 500 hitting record highs on Friday as investors responded to potential rate cuts from the U.S. Federal Reserve.
In Toronto, Canada’s main stock index was up 1.4 per cent for the week despite closing slightly lower Friday even as gold and crude oil prices rose further on geopolitical anxiety over a potential military confrontation between the U.S. and Iran.
“When we look at this past week there’s no doubt that the primary positive catalyst was the U.S. central bank being more dovish and next week the baton will be passed on to the G20 and hopefully we can get positive news coming out of the G20 to really create a nice environment for markets over the next couple of weeks,” says Macan Nia, senior investment strategist at Manulife Investments.
While the U.S. and China aren’t expected to reach a trade deal at the G20, investors are hoping for positive signs coming from the meeting between the countries two presidents.
“Right now there’s a lot of uncertainty,” Nia said in an interview. “If we can get some more positive remarks between the two countries that would provide more clarity and at the end of the day markets like clarity and they like consistency.”
The S&P/TSX composite index closed down 49.40 points to 16,525.43 after hitting an intraday high of 16,558.88.
In New York, the Dow Jones industrial average was down 34.04 points at 26,719.13 after setting a record intraday high of 26,907.37. The S&P 500 index was down 3.72 points at 2,950.46 after also setting a new record of 2,964.15, while the Nasdaq composite was down 19.63 points at 8,031.71.
The Canadian dollar traded for an average of 75.69 cents US compared with an average of 75.81 cents US on Thursday.
Nine of the 11 major sectors on the TSX were lower, led by health care, which dropped 3.1 per cent as shares of several marijuana companies fell. Canopy Growth Corp. shares were down 7.6 per cent after its fourth-quarter net loss was larger than expected and higher than a year ago.
Consumer staples fell two per cent and energy dropped 0.78 per cent as Crescent Point Energy Corp. and Imperial Oil were down 2.45 and 1.95 per cent respectively.
Energy fell even though the August crude contract was up 36 cents at US$57.43 per barrel and the August natural gas contract was up 0.3 of a cent at US$2.17 per mmBTU after U.S. President Donald Trump abandoned a military attack on Iran in response to the downing of one of its surveillance drones.
“I think markets are taking a step back and think that cooler heads will prevail so that initial spike that we saw on the price of oil at the beginning of the day has come back,” said Nia.
Materials was the biggest gainer on the day, rising 0.64 per cent as Eldorado Gold was up 5.55 per cent. A more dovish tone by the U.S. Federal Reserve helped move gold prices higher. The August gold contract was up US$3.20 at US$1,400.10 an ounce, the highest level in nearly six years. The July copper contract was down 0.75 of a cent at US$2.70 a pound.
“That more dovish tone, not only out of the U.S. central bank, but you are getting even a dovish tone globally among central bankers that is very constructive or that is very positive for gold.”
Companies in this story: (TSX:CPG, TSX:IMO, TSX:ELD, TSX:WEED, TSX:GSPTSE, TSX:CADUSD=X)
Ross Marowits, The Canadian Press