Canada’s main index rose on Friday, ending the first week of 2024 on a positive note, as investors shifted into sectors, such as energy and financials, offering cheaper valuations and took in stride disappointing domestic jobs data. U.S. stock indexes endured a topsy-turvy session but ultimately closed marginally higher, as investors absorbed the latest macroeconomic data which offered contrasting views on when interest rate cuts may begin.
The Toronto Stock Exchange’s S&P/TSX composite index ended up 66.2 points, or 0.3%, at 20,937.55. For the week, it was down 0.1%, as some of the optimism that had fueled markets in the final two months of 2023 ebbed.
The trend at the start of the year has been for investors to reduce their exposure to some high-flying sectors, such as technology, and move to sectors that appear to offer more value, said Elvis Picardo, a portfolio manager at Luft Financial, iA Private Wealth.
“You are seeing financials attract a bid ... energy is stabilizing. So it is quite likely you are seeing some element of sector rotation going on to kick off 2024,” Picardo said.
Canada’s economy added barely any jobs in December, data showed.
“Investors were braced for some kind of slowdown in Canada, so it doesn’t change the narrative much,” Picardo said. “The bigger issue at play was what happens south of the border.”
U.S. employers hired more workers than expected in December while raising wages at a solid clip, casting some doubt on financial market expectations that the Federal Reserve would start cutting interest rates in March.
The Toronto market’s energy sector rallied 0.6% as the price of oil settled 2.2% higher at $73.81 a barrel on rising Middle East tensions.
Financials, the TSX’s most heavily weighted sector, added 0.5% and healthcare was up 1.4%, led by Bausch Health Companies .
Its shares rose to a near three-month high after notching a gain of 5.3%.
All three U.S. benchmarks recorded their first weekly declines for ten weeks: the S&P 500 dropped 1.54%, while the Nasdaq Composite slumped 3.26%, and the Dow Jones Industrial Average dipped 0.59%.
For the S&P 500, it was its worst weekly performance since late October, while the Nasdaq posted its worst week since late September.
Investors have been cautious in the opening sessions of 2024, as they awaited further clarity on when interest rate cuts will begin, and how quickly they will happen.
Hopes for a swift pace of easing had triggered a blistering rally in the final weeks of 2023, which took the S&P 500 to within 1% of its all-time high, so any undermining of that hypothesis has been a cue for profit-taking.
“For now, it probably looks like a healthy correction for a market that was overbought at the end of last year,” said Greg Boutle, head of US equity & derivative strategy at BNP Paribas.
Friday’s session saw markets gyrate throughout the day, as investors absorbed the latest macroeconomic data which offered contrasting views on when interest rate cuts may begin.
Initially, robust jobs data in a report from the Labor Department, which showed U.S. employers hired more workers than expected in December, doused expectations of rapid easing of interest rates, pushing futures lower.
However, a survey from the Institute for Supply Management (ISM) then showed activity in the services sector fell in December, pointing to a weaker economy. That encouraged those betting on rapid easing, sending markets higher through the morning and into the afternoon.
Despite further undulations in the afternoon, ultimately the three benchmarks eked out a winning finish to the day - the first positive sessions of 2024 for the S&P and Nasdaq.
“In terms of the macro data, I think there’s something for everybody, in terms of the data that we’re seeing,” said BNP’s Boutle.
He added though that this week’s data releases were unlikely to have convinced anyone to have changed their minds from their position on rate-cuts coming into the year.
Traders see a 66.4% chance of at least a 25-basis point cut in March, according to the CME Group’s FedWatch tool.
The yield on the benchmark U.S. Treasury 10-year note , reflecting interest rate expectations, finished the week at 4.05%.
The financials index led gainers among the S&P 500 sectors, rising 0.5%, as banks continued to perform well ahead of the start of earnings season next week.
Large regional banks were buoyant, with Zions Bancorporation , Citizens Financial Group and Comerica Inc all rising between 2.6% and 3.3%. The S&P Banks index gained 1.3%, hitting an 11-month high.
On Friday, the S&P 500 gained 8.56 points, or 0.18%, to end at 4,697.24 points, while the Nasdaq Composite gained 13.77 points, or 0.09%, to 14,524.07. The Dow Jones Industrial Average rose 25.77 points, or 0.07%, to 37,466.11.
Applied Therapeutics tumbled 40.6% after the drug developer’s heart disease drug showed disappointing results in a late-stage trial.
Palantir Technologies lost 1.7% after Jefferies downgraded the data analytics firm to “underperform” on high stock valuations.
Peloton jumped 9.6% after the fitness equipment maker said it will bring its workout content to short-form video platform TikTok in an exclusive partnership.
The volume on U.S. exchanges was 11.2 billion shares, compared with the 12.3 billion average over the last 20 trading days.
Reuters, Globe staff
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