Canada’s main stock index fell to a three-month low on Friday, extending recent underperformance versus U.S. markets, as investors shunned the financial and energy shares that have a heavy weighting in the index in favor of technology shares.
The Toronto Stock Exchange’s S&P/TSX composite index ended down 59.01 points, or 0.3%, at 21,639.10, its lowest closing level since March 6.
For the week, the index was down 1.7%, its biggest weekly decline since October. It was the fourth straight weekly decline for the TSX, which is the longest such stretch since May 2023.
“It looks like it’s really diverging from the S&P 500 which is closing out a very strong week,” said Brian Madden, chief investment officer at First Avenue Investment Counsel Inc.
“Money is professionally managed and a lot of money chases performance and performance is very much in the United States and not in Canada.”
The TSX is up 3.3% since the start of the year, falling well below the 13.9% gain for the S&P 500 which has a higher weighting in high-flying technology shares.
The U.S. benchmark closed slightly lower on Friday but was holding near the record closing high it posted on Thursday.
There is “good leadership from the technology group in the States. Canada, despite Shopify’s best efforts today, is not really enough to hold up our whole market.”
The Toronto market’s technology sector rose 0.9%, with e-commerce company Shopify Inc up 4.6%.
But most major sectors ended lower, with financials , which account for 29% of the index’s weighting, down 0.5% and energy, which has a 20% weighting, falling 0.7%.
The price of oil settled 0.2% lower at $78.45 a barrel, giving back some of its weekly advance.
Defensive sectors also lost ground, with consumer staples down 1.6% and communication services ending 1.2% lower.
The Nasdaq eked out a fifth straight record closing high on Friday following gains in Adobe and other technology-related shares, while the S&P 500 and Dow ended slightly lower.
The S&P 500 ended its four-day run of record closing highs, but still climbed more than 1% for the week.
The S&P 500 technology sector rose 0.5%, hitting another record high close. The communication services sector rose 0.6%, leading gains among sectors.
Adobe shares jumped 14.5% a day after the company raised its annual revenue forecast on more demand for its artificial intelligence-powered software.
“You’ve had a big rally this week, led by big-cap tech. Under the surface, we have a lot of areas acting weak,” said Adam Sarhan, chief executive of 50 Park Investments in New York.
The Russell small-cap index fell 1.6%, adding to recent losses, while the S&P 500 industrials sector was down 1%.
The Dow Jones Industrial Average fell 57.94 points, or 0.15%, to 38,589.16. The S&P 500 lost 2.14 points, or 0.04%, at 5,431.6 and the Nasdaq Composite added 21.32 points, or 0.12%, at 17,688.88.
For the week, the Dow was down 0.5%, the S&P 500 rose 1.6% and the Nasdaq was up 3.2%.
Investors are still trying to gauge how soon the Federal Reserve might be able to cut interest rates.
Fed Bank of Chicago President Austan Goolsbee said he was relieved after data this week showed inflation in May had cooled, but he would still like to see “more months” of similar data before cutting interest rates.
On Wednesday, Fed policymakers dialed back their projections for three cuts this year to just one.
In a report on Friday, a preliminary reading of the University of Michigan’s Consumer Sentiment Index slipped to 65.6 in June, sharply lower than expectations.
Nvidia shares ended up 1.8% after briefly surpassing Apple as the world’s second-most valuable company.
A BofA Global Research report showed U.S. value stock funds had $2.6 billion of outflows, while investors poured $1.8 billion into U.S. growth stock funds in the week to Wednesday.
Volume on U.S. exchanges was 10.12 billion shares, compared with the 12.10 billion average for the full session over the last 20 trading days.
Declining issues outnumbered advancers on the NYSE by a 2.39-to-1 ratio; on Nasdaq, a 2.51-to-1 ratio favored decliners.
The S&P 500 posted 11 new 52-week highs and 16 new lows; the Nasdaq Composite recorded 30 new highs and 192 new lows.
- Reuters
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