The TSX, Dow and the S&P 500 indexes ended the week at record highs on Friday following a stronger-than-expected U.S. jobs report, while investors shrugged off concerns over the Delta variant impacting a nascent economic recovery.
Some of the sharpest action was in the bond market, where Treasury yields tend to move with expectations for the economy and for inflation. The yield on the 10-year U.S. Treasury climbed to 1.29% from 1.21% late Thursday, clawing back all the losses it sustained over the last week. Canada’s 10-year government moved in lockstep, trading at 1.24% by late afternoon.
Yields jumped as economists said Friday’s encouraging jobs report will give the Federal Reserve another nudge to pare back its bond-buying program, which is trying to juice the economy by keeping longer-term rates low. Economists say an announcement by the Fed about a possible slowdown in purchases could come as soon as the end of the month.
Nonfarm payrolls increased by 943,000 jobs last month, a Labor Department report showed. Economists polled by Reuters had forecast payrolls would increase by 870,000 jobs.
The Labor Department’s closely watched employment report also showed strong wage gains, as employers competed for scarce workers, and a drop in the unemployment rate to a 16-month low.
“I think that investors are now saying we’ve got renewed confidence in the economic recovery,” said Sam Stovall, chief investment strategist at CFRA. “And as a result, (investors) are rotating again into the cyclical, the value stocks, as well as the smaller-cap issues.”
The S&P/TSX Composite index rose 99.94 points, or 0.49%, to 20,475.42, aided by a more than 1% advance in both financial and energy stocks. For the week, the Canadian benchmark index gained just shy of one percentage point.
The week saw some of the biggest names in corporate Canada report second-quarter earnings that beat Street expectations. According to Refinitiv, 65% of TSX companies that have reported results have exceeded revenue expectations, and 60% have surpassed Street views on the bottom line, prior to Friday.
On Wall Street Friday, four of the 11 major S&P 500 sectors rose, with financials posting the biggest daily percentage gain since July 20. The S&P 500 technology sector index fell.
Although the three main indexes gained for the week following a stellar corporate earnings season, sentiment has been hurt by fears of higher inflation resulting in a sudden tapering in monetary policy. For the week ended on Friday, the S&P 500 was up 0.94%, the Dow added 0.78% and the tech-heavy Nasdaq gained 1.11%.
The Dow Jones Industrial Average on Friday rose 144.26 points, or 0.41%, to 35,208.51, the S&P 500 gained 7.42 points, or 0.17%, to 4,436.52 and the Nasdaq Composite dropped 59.36 points, or 0.4%, to 14,835.76.
Analysts expect second-quarter profit growth of 92.9% for S&P 500 companies, according to IBES data from Refinitiv. Of the 427 companies in the index that have reported earnings so far, 87.6% beat analyst expectations, the highest on record.
The Canadian dollar weakened against its U.S. counterpart on Friday as oil prices fell and investors were more impressed by jobs data in the United States than in Canada, with the loonie adding to this week’s decline.
Canada added 94,000 jobs in July, far fewer than expected, though most of the gains were in full-time work, and the unemployment rate continued to tick down as the economy reopened.
The Canadian dollar was trading 0.4% lower at 1.2555 to the greenback, or 79.65 U.S. cents, after trading in a range of 1.2493 to 1.2580. For the week, it was down 0.7%.
The price of oil , one of Canada’s major exports, settled 1.2% lower at $68.28 a barrel, closing out a week of losses on worries that restrictions to curb the spread of the Delta coronavirus variant will derail global economic gains.
The December gold contract ended down US$45.80 at US$1,763.10 an ounce and the September copper contract was unchanged at US$4.35 a pound.
Bitcoin was up around 5% at $42,953, its highest price since May. Ether, the world’s second largest cryptocurrency, rose to around $2927, a 4.3% gain, a day after a major software upgrade to its underlying blockchain.
Volume on U.S. exchanges was 8.65 billion shares, compared with the 9.63 billion average for the full session over the last 20 trading days. Advancing issues outnumbered declining ones on the NYSE by a 1.33-to-1 ratio; on Nasdaq, a 1.07-to-1 ratio favored advancers. The S&P 500 posted 42 new 52-week highs and 1 new low; the Nasdaq Composite recorded 112 new highs and 80 new lows.
Read more: Stocks that saw action Friday - and why
Reuters, The Associated Press, Globe staff
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