Canada’s main stock index closed above 20,000 for the first time on Friday, with one analyst saying U.S. and Canadian markets were led by an ideal American jobs report that was neither too hot nor too cold.
The gain of 559,000 US jobs in May was strong enough to be a positive sign for the economy while being conservative enough to hold back fears of increased inflation, said Allan Small, senior investment adviser at IA Private Wealth.
“I think the market really started shooting up when the jobs report came out,” said Small, who said Canadian markets were buoyed by the American report, rather than held back by a weaker Canadian jobs report.
“If anybody thought the (U.S. Federal Reserve) was going to be raising rates sooner rather than later, a number like we saw today — strong but not too strong — means maybe the Fed could delay that a little bit longer.”
Small said the Canadian jobs report was much more negative, with the economy losing 68,000 jobs in May, compared to an expected loss of between 20,000 and 35,000 jobs.
However, relaxed fears around inflation in the short term meant gold had a great day on the market, with the August gold contract up US$18.70 at US$1,892 an ounce.
Meanwhile, other commodities performed strongly on Friday, with the July copper contract up six cents at US$4.53 a pound. The July crude contract was up 81 cents at US$69.62 per barrel and the July natural gas contract was up five cents at US$3.09 per mmBTU.
All of those factors led to a positive close for the TSX at 20,029.19, which was up up 87.80 points from the previous day.
The index had topped the 20,000 mark during the day several times earlier in the week, pulling back slightly at the close, before finally holding on to those gains Friday.
In New York, the Dow Jones industrial average was up 179.35 points at 34,756.39. The S&P 500 index was up 37.04 points at 4,229.89, while the Nasdaq composite was up 199.98 points at 13,814.49.
Small said the commodity numbers also translated to a stronger Canadian dollar on Friday, which traded for 82.75 cents US compared with 82.62 cents US on Thursday.
"The dollar is riding this wave of commodities higher,” said Small.
“We’re seeing a lot of the things that Canada pulls out of the ground, grows, et cetera … right now the prices for these things is up. At the same time we’re seeing a little bit of weakness with the U.S. dollar.”
Longer term, Small said he expects the dollar to drop when interest rates rise and the U.S. dollar regains strength.
“I believe the Canadian dollar belongs more in the 75 cents to 80 cents range,” said Small.
One notable trend Small pointed out in Friday’s markets was the relative strength of tech stocks, with Apple Inc. up 1.9 per cent US$125.89, Facebook Inc. up 1.3 per cent to US$330.35 and Amazon up 0.6 per cent to US$3206.22
Small said it could be a good time for investors to consider buying into tech stocks on their next dip.
He said they’ve lagged behind in the market as people focus more on commodities that are more immediately important to post-pandemic re-openings, but said tech stocks will follow in the coming months.
“Tech has generally been put on the back burner as one of those things that’s always there,” said Small.
“But I just think that … it’d be foolish for individual investors to assume that technology won’t continue to lead this market higher in the months and quarters ahead.”
This report by The Canadian Press was first published June 4, 2021.
Companies in this story: (TSX:GSPTSE, TSX:CADUSD=X)
Salmaan Farooqui, The Canadian Press
