S&P/TSX Compound ends best week since February 2021 despite Friday’s losses

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TORONTO — Canada’s main stock index ended a five-day winning streak on a broad-based decline, including its major sectors, but still posted its best week in more than a year.

The S&P/TSX Composite Index closed down 79.93 points at 18,982.92 points, but still ended the week up 3.2% for its best performance since February 2021. The Toronto market is up 0.6% in July but down 10.6% so far in 2022.

“It’s been a great week and we’ve seen a good rebound and I think what really informed the markets this week was the start of earnings season,” said Lesley Marks, chief investment officer at Mackenzie Investments.

Although the earnings are largely coming from the United States, they are impacting sentiment toward Canadian stocks by association, she said.

“And I think the reality was that we had some corporate earnings data that wasn’t as bad as expected.”

On Friday, Canada’s tech sector was dragged lower by weakness south of the border, with shares of Snap tumbling 39% after reporting very disappointing earnings. Shopify ended a good week losing 7.3% on Friday.

In New York, the Dow Jones industrial average was down 137.61 points to 31,899.29. The S&P 500 index fell 37.32 points to 3,961.63, while the Nasdaq composite fell 225.50 points to 11,834.11.

US markets rose 2-3.3% for the week despite Friday’s losses and 4.3-7.3% in July. However, they are down from 12.2 to 24.4% in 2022.

The energy sector fell on Friday as crude oil prices fell to their lowest level in more than three months. Shares of Enerplus Corp. and Vermilion Energy Inc. were down 3.1% and 3.0%, respectively.

The September crude contract was down US$1.65 at US$94.70 per barrel and the September natural gas contract was up 38 cents at US$8.20 per mmBTU.

“The energy sector, like most commodities, is grappling with the potential for an economic downturn or recession, and so commodity names are quite off their highs,” Marks said in an interview.

Prices have been falling since the big spike caused by Russia’s invasion of Ukraine, but are still generally high, he said.

“While commodity prices have reached highs, they are still in most cases above their pre-pandemic levels, so I really think it is important to have a perspective on the movements longer-term commodity prices, rather than looking at what we’ve seen over the past few months.”

The Canadian dollar was trading at 77.66 cents US against 77.55 cents US on Thursday.

Materials were also down even though metals were up.

The August gold contract rose US$14.00 to US$1,727.40 per ounce and the September copper contract rose 5.1 cents to US$3.35 per pound .

Marks said the improvement in market activity this week stems from weaker economic data that reassures people that central bank moves to raise interest rates are starting to slow the economy.

“And so when people start to feel like the central bankers’ job is done or having an impact, they’ll feel like we might be nearing the end of this cycle of very aggressive interest rate tightening. .”

Additionally, she said markets rebounded from a selloff as second-quarter results weren’t as bad as expected as many companies were able to pass on higher prices to maintain profits.

“So I think those two things combined have created a good level of support for the stock markets.”

Next week’s results will likely be dominated by an interest rate hike by the US Federal Reserve and US GDP numbers. The Fed is expected to raise its rate by three-quarters of a percentage point.

“If it’s in line with expectations, I think the market will take that into account.”

If the GDP numbers are negative, it will represent a technical recession. But Marks expects people to look beyond the headline figure for what’s driving this move and the backdrop of a still strong economy, good jobs and wage gains.

“So I think what people are really going to look at in the GDP numbers is less the headline, but more the consumer and business side of the GDP.”

This report from The Canadian Press was first published on July 22, 2022.

Companies in this story: (TSX:VET, TSX:ERF, TSX:SHOP, TSX:GSPTSE, TSX:CADUSD=X)

Ross Marowits, The Canadian Press


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