S&P/TSX Composite Drops Over 300 Points Amid Job Data Reaction

Rosa Saba, The Canadian Press

TORONTO — On Friday, Canada's primary stock index experienced a significant drop, falling over 300 points despite an increase in energy stocks, as the price of oil saw a rise. U.S. stock markets also fell, influenced by new labour market data released that day.

The S&P/TSX composite index closed down by 305.63 points, finishing at 24,767.73. In New York, the Dow Jones industrial average decreased by 696.75 points, ending at 41,938.45. The Nasdaq composite dropped 317.25 points to 19,161.63, while the S&P 500 index fell by 91.21 points, closing at 5,827.04.

Recent labour market reports from both Canada and the U.S. showed stronger-than-expected job growth. In Canada, the economy added 91,000 jobs in December, and the unemployment rate decreased to 6.7 percent. Investment advisor Ilana Schonwetter from Blueshore Financial noted that while this is positive news for Canada, the Bank of Canada requires more consistent data to confirm improvement in the job market.

She explained that it will take a few more months of positive job reports to ascertain whether the recent dip in unemployment rate is an anomaly or if it signifies a real trend. The Bank of Canada has been actively cutting interest rates in response to economic challenges, including a sluggish labour market, and it is anticipated that these cuts will continue into 2025.

Despite the positive employment figures in Canada, markets still faced downward pressure largely due to U.S. equity reactions to their own jobs report. The U.S. showed job growth for December and a reduction in unemployment to 4.1 percent. However, Schonwetter pointed out that in this situation, strong job data is perceived negatively, as it could mean fewer interest rate cuts from the U.S. Federal Reserve than previously anticipated.

She explained that the central theme behind the market sell-off on Friday was the impact of the jobs report and its implications for the Federal Reserve's future actions. “The positive jobs numbers give the Fed less incentive to cut rates,” she indicated.

The economic conditions and monetary policies in Canada and the U.S. are likely to diverge in the near term. Schonwetter suggested that the Bank of Canada is facing a challenging environment. Factors such as high personal debt levels among Canadians, forthcoming mortgage renewals, and the possible introduction of tariffs all create an atmosphere of uncertainty for Canadian investors.

The value of the Canadian dollar fluctuated slightly, trading at 69.34 cents per U.S. dollar compared to 69.47 cents on Thursday. Meanwhile, oil prices were on the rise, with the February crude oil contract up by US$2.65, settling at US$76.57 per barrel. The February natural gas contract also saw an increase of 29 cents, closing at US$3.99 per mmBTU. On the commodities front, the February gold contract rose by US$24.20 to reach US$2,715 an ounce, while the March copper contract decreased slightly by a penny, settling at US$4.30 a pound.

— With files from The Associated Press

Stocks, Markets, Jobs