Canada’s main stock index rose on Friday, while U.S. markets lost ground as oil prices eased back to where they were before the war with Iran.
The S&P/TSX composite index was up 129.79 points at 34,980.00.
Ian Chong, portfolio manager for First Avenue Investment Counsel Inc., said the TSX benefited from gains in the materials sector, which has a significant weight in the overall index. He said gold prices lifted that part of the market while energy prices fell.
As the price of oil spiked in tandem with the U.S. and Israel’s war on Iran, investors grew increasingly concerned about the impact on inflation. They figured higher energy prices would drive inflation higher, potentially forcing central banks like the U.S. Federal Reserve to hike interest rates. Now that oil prices have begun to normalize, those inflation fears have eased.
“You’re seeing those inflation expectations get tempered somewhat, which is therefore positive for gold, and hence gold driving the TSX movement today,” Chong said.
The August gold contract was up US$48.70 at US$4,096.30 an ounce.
In New York, the Dow Jones industrial average was down 44.51 points at 51,876.11. The S&P 500 index was down 3.47 points at 7,354.02, while the Nasdaq composite was down 60.99 points at 25,297.62.
The August crude oil contract was down US$2.69 at US$69.23 per barrel.
The price of Brent crude oil, the international standard, dropped 3.8% to US$72.60. That’s lower than it was the day before the United States and Israel attacked Iran, which eventually led to the closure of the Strait of Hormuz and the curtailment of oil shipments worldwide.
In the bond market, U.S. Treasury yields eased with oil prices. The yield on the 10-year Treasury fell to 4.37% from 4.4% late Thursday.
Most of the U.S. stock market rose on Friday, but declines in AI stocks kept the market in check.
After soaring to tremendous heights and leading the market for years, AI stocks have been under pressure recently because of worries their profits can’t possibly keep pace with the tremendous rallies for their stock prices. And those drops have an outsized effect because AI stocks have become Wall Street’s largest and most influential, giving movements for their stock prices more weight on indexes than others.
Chong said it has been a “tough week for the tech sector,” but underneath the surface, there appears to be a market rotation underway.
“I wouldn’t be overly concerned where people are like, ‘This is a bubble popping, it’s crashing.’ It’s not really crashing, it’s a bit of a rotation, it’s a broadening out and I think you’ve seen that throughout the week as well,” he said.
Micron Technology’s drop of 6.7% was the heaviest weight on the U.S. market. The maker of memory for computers has been a big winner this year, with its stock roughly quadrupling, because the AI boom has created a surge of demand for its products.
But investors saw the downside of that surge Thursday, when Apple said it had to raise prices on laptops and other products by significant percentages to make up for the increases in memory prices. The worry is that such higher prices could ultimately lead to lower demand.
Chong said while there is somewhat of a narrative that price hikes among the tech giants could spur some inflationary concerns, “but clearly offsetting that is the whole oil situation.”
The Canadian dollar traded for 70.49 cents US compared with 70.40 cents US on Thursday.
— With files from The Associated Press
