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Canada’s main stock index ended lower on Monday as resource shares fell, but optimism that long-term borrowing costs have peaked helped to cap losses.

The Toronto Stock Exchange’s S&P/TSX composite index closed down 80.91 points, or 0.4%, at 19,743.94, after five straight days of gains.

Bond yields rose on Monday but were trading far below their peaks in October as investors bet the Federal Reserve and the Bank of Canada (BoC) are finished raising interest rates.

Higher interest rates reduce the value to investors of the expected cash flows companies are expected to produce.

“It looks like bond yields have peaked, so there should be less pressure on valuations going forward and so we’ve shifted from a market where the risk is to the downside to really a two-way market,” said Joseph Abramson, co-chief investment officer at Northland Wealth Management.

Investors believe that “we’ve seen the worst of the valuation depression, but growth is still slowing,” Abramson said.

Data on Friday showed both U.S. and Canadian job growth slowed in October.

Canadian market participants expect the BoC to start cutting its key policy rate from a 22-year high of 5.00% in April 2024, a month later than the previous forecast, according to a survey released by the central bank.

The Toronto market’s energy sector fell 1%, while the materials group, which includes precious and base metals miners and fertilizer companies, was also down 1% as the price of gold dropped.

The real estate sector, which is particularly sensitive to higher interest rates, lost 1.4% and healthcare was down 2%.

The consumer staples sector was a bright spot, rising 0.8%.

Shares of Telus International Cda rose 6.6%, reversing their decline on Friday.

U.S. stocks closed slightly higher on Monday as investors awaited guidance from a host of Federal Reserve policymakers later in the week on the central bank’s policy path, with a large amount of bond supply also due to hit the market.

Equities last week posted their biggest weekly percentage gain in about a year, as a weaker-than-expected U.S. payrolls report on Friday sent Treasury yields lower on the view the Fed was done hiking interest rates and could start cutting them next year.

Market expectations that the Fed will hold interest rates steady at its December meeting stand at 90.4%, down from 95.2 on Friday but above the 74.4% a week ago. Expectations for a rate cut of at least 25 basis points have grown to more than 50% at the May 2024 meeting, according to CME’s FedWatch Tool.

Markets will look for more clarity on the Fed’s intentions from officials speaking later in the week, including Chair Jerome Powell, and voting members such as New York Fed chief John Williams and Dallas Fed President Lorie Logan.

“Unless something in the economic data prompts it, you won’t see them change their tone,” said Stephen Massocca, senior vice president at Wedbush Securities in San Francisco.

Expectations the Fed was likely done with rate hikes sent the S&P 500 up 5.85% last week and the Nasdaq up 6.61%, their biggest weekly jumps since November 2022.

“Whatever that buying force was that sort of went rampant on Friday is not around today and so a lot of these names are drifting back down, and yields are a little higher,” said Massocca.

Meanwhile, the yield on the benchmark 10-year Treasury note , which slid to five-week lows on Friday, reversed course to reach a high near 4.67% on Monday, ahead of this week’s Treasury auction of about $112 billion in three-year and 10-year notes, as well as 30-year bonds.

According to preliminary data, the S&P 500 gained 8.71 points, or 0.20%, to end at 4,367.05 points, while the Nasdaq Composite gained 42.12 points, or 0.31%, to 13,518.78. The Dow Jones Industrial Average rose 42.12 points, or 0.12%, to 34,102.06.

The economic-data calendar for this week is sparse, with weekly jobless claims numbers due on Thursday and University of Michigan’s consumer sentiment report on Friday.

Walt Disney, Instacart and Biogen are among major companies reporting earnings this week.

A total of 403 companies in the S&P 500 have reported profits through Friday the third quarter, with 81.6% surpassing analyst estimates, per LSEG data.

Dish Network plummeted after touching a 25-year low of $3.59 on news that the pay-TV provider missed third-quarter revenue estimates and CEO Erik Carlson would step down from the role.

Bumble fell as the dating app operator said founder Whitney Wolfe Herd will step down as chief executive.

Reuters

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