The Toronto Stock Exchange's S&P/TSX Composite Index surged to a record high on Friday, up 0.53% to 25,816.05, as investors reacted positively to domestic and U.S. jobs data. The report raised expectations for interest rate cuts in both countries, bolstering market sentiment despite mixed economic signals.
Canada’s unemployment rate climbed to 6.8% in November, the highest since January 2017 (excluding pandemic years), even as the economy added a net 50,500 jobs—double the expected 25,000 gain. The rise in unemployment, attributed to more people entering the labor force, increased the likelihood of a 50-basis-point rate cut by the Bank of Canada on December 11.
Technology stocks were the standout performers, driving the TSX to new heights. This rally reflects investor optimism for growth-oriented sectors, particularly as lower borrowing costs seem increasingly likely.
However, not all sectors fared equally. Energy stocks faced headwinds as oil prices dropped nearly 1%, with Brent crude at $67.53 per barrel. Meanwhile, gold inched up 0.1% to $2,636 per ounce but remained on track for a second straight week of declines.
Toronto-Dominion Bank (TSX: TD) was a focal point for analysts following its disappointing Q4 earnings report. Shares fell over 7% on Thursday after the bank posted adjusted EPS of $1.72, below expectations of $1.81. The miss was attributed to rising non-interest expenses, which climbed 11% year-over-year.
Analysts provided mixed reactions:
Incoming CEO Raymond Chun faces significant challenges as he navigates regulatory scrutiny in the U.S. while reassessing the bank's overall strategy. Analysts noted that "everything is on the table," from potential asset disposals to operational overhauls.
Here’s a roundup of notable analyst actions:
Canaccord Genuity on TD Bank:
National Bank on TD Bank:
BMO on TD Bank:
Canada’s labor market data, while mixed, solidified expectations of a significant rate cut. Futures markets now price in a 68% chance of a 50-basis-point reduction, up from 55% prior to the jobs report. Meanwhile, in the U.S., nonfarm payrolls rose by 227,000 in November, exceeding estimates of 214,000, further fueling speculation of a Federal Reserve rate cut later this month.
The TSX rally mirrored broader global market movements:
Friday’s record-setting performance on the TSX highlights investor confidence in the face of mixed economic signals. While technology stocks led the charge, concerns about rising unemployment and sector-specific challenges like TD Bank’s regulatory woes remain. With rate cut decisions looming, the coming weeks could set the tone for the TSX as it enters 2025. For now, optimism reigns supreme, driven by a blend of strong market momentum and favorable policy expectations.
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