Canada's primary stock benchmark, the S&P/TSX Composite index, concluded Friday's trading session in negative territory, stepping back from its recent record peak. The index closed down 166.16 points, or 0.5%, settling at 31,311.41. This decline followed the index achieving a record closing high just a day earlier, on Thursday.
Robust Jobs Data Fuels Economic Optimism
Despite the market pullback, a surprisingly strong domestic jobs report provided a solid underpinning for economic confidence. Canada's economy generated a net addition of 53,600 jobs in November, defying analyst forecasts which had predicted a loss of 5,000 positions. This marked the third consecutive month of robust employment gains and pushed the unemployment rate down to a 16-month low.
"The big thing is that the Canadian economy is in better shape than what people thought just, say, a month or two ago," remarked Philip Petursson, Chief Investment Strategist at IG Wealth Management. The positive data has significantly altered expectations for the central bank's monetary policy path.
Implications for Bank of Canada Policy
The stellar employment numbers have cemented the view that the Bank of Canada (BoC) will maintain its current stance. "The data cements expectations that the Bank of Canada will remain on hold next week and likely is done with its easing cycle," stated Angelo Kourkafas, Senior Global Investment Strategist at Edward Jones.
Markets now widely anticipate the BoC to hold its benchmark interest rate steady at 2.25%, a three-year low, during its upcoming meeting. Furthermore, investors have begun pricing in the possibility of interest rate hikes starting in 2026, reflecting the economy's resilient performance.
Sector Performance and Weekly Trend
The market's decline was broad-based, with several key sectors facing pressure:
- The materials group, which includes precious and base metal miners, fell 1.1%. Shares of Orla Mining plummeted 11.1% after Fairfax Financial Holdings disclosed it had sold 25 million shares of the company.
- The technology sector retreated 0.8%, dragged lower by a 1.7% drop in shares of e-commerce giant Shopify Inc.
- Industrials also ended 0.8% lower, with railroad shares losing ground.
For the entire week, the TSX Composite index registered a modest loss of 0.2%. This slight weekly decline was attributed to weaker gold prices, which offset the positive impact of stronger-than-expected earnings reported by major Canadian banks.
Investment strategists view the pullback as a period of consolidation after strong gains. "I think the overarching theme is still positivity but we have some consolidation that's going on into the end of the year ... with some lightening up where profits have been made, getting ready for what we're seeing in 2026," explained Philip Petursson of IG Wealth Management. The market appears to be pausing to digest its recent rally while positioning for the future economic landscape.
