S&P/TSX Index Surges Nearly 200 Points as U.S. Markets Also Rally to Conclude a Turbulent Week

By Canadian Press

TORONTO — The S&P/TSX composite index, Canada's primary stock index, rose nearly 200 points on Friday, concluding a challenging week for financial markets. In a favorable turn, major U.S. stock indices also experienced gains of over one percent.

The S&P/TSX composite index closed the day at 24,599.48, marking an increase of 185.54 points. Across the border, the Dow Jones industrial average jumped by 498.02 points, finishing at 42,840.26. Similarly, the S&P 500 index climbed 63.77 points, closing at 5,930.85, while the Nasdaq composite index gained 199.83 points, reaching 19,572.60.

This rally came after a particularly tumultuous week where markets faced steep declines. On Wednesday, following a decision by the U.S. Federal Reserve to cut its key interest rate and signal only two further cuts for 2025, the S&P 500 fell nearly three percent. During that same session, the TSX dropped over two percent, with the Nasdaq losing 3.6 percent and the Dow down 2.6 percent.

Ilana Schonwetter, an investment advisor and portfolio manager at Blueshore Financial, remarked, “It was one of the single largest drops in a day for 2024.” However, she noted a rebound in the last two days, which she described as a possible knee-jerk reaction to the Fed's announcement.

Schonwetter explained that the Federal Reserve's latest position indicates it no longer feels the need to aggressively lower rates as the economy appears to be performing well. “I think the fundamentals for the U.S. remain very strong,” she stated.

Contrasting with the U.S., Canada faces more economic uncertainty. This week was marked by political turbulence, including the resignation of Finance Minister Chrystia Freeland and uncertainty surrounding Prime Minister Justin Trudeau's position, contributing to the country's market shakiness.

Looking ahead, Schonwetter predicted the Bank of Canada might implement more rate cuts next year compared to the Federal Reserve. She pointed out that the central bank is closely monitoring the unemployment rate, which has recently increased, as a key indicator for potential rate changes.

Nevertheless, she cautioned that there is a delicate balance to maintain: a significant divergence between Canada’s key interest rate and that of the Fed could lead to inflationary pressures, especially if the Canadian dollar continues to weaken.

The Canadian dollar was trading at 69.61 cents against the U.S. dollar, slightly up from 69.59 cents the previous day. In commodities, the February crude oil contract appreciated by eight cents, reaching US$69.46 per barrel, while the January natural gas contract increased by 17 cents to US$3.75 per mmBTU. Furthermore, the February gold contract surged by US$37, closing at US$2,645.10 per ounce, and the March copper contract rose by two cents, finishing at US$4.10 per pound.

This report was first published on December 20, 2024.

Stocks, Market, Canada