S&P/TSX composite posts small gain Friday, U.S. markets down

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TORONTO — Strength in the energy sector helped Canada's main stock index post a small gain Friday, while U.S. stock markets were down as debt ceiling talks fizzled ahead of the weekend.

Canada outperformed the U.S. markets Friday after lagging for most of the week, said Brian Madden, chief investment officer with First Avenue Investment Counsel. Stocks south of the border made gains in the morning only to flip to losses after Republicans said they're pausing debt ceiling negotiations on preventing a default.

The S&P/TSX composite index closed up 53.97 points at 20,351.06.

In New York, the Dow Jones industrial average was down 109.28 points at 33,426.63.The S&P 500 index was down 6.07 points at 4,191.98, while the Nasdaq composite was down 30.94 points at 12,657.90.

In the U.S., ongoing talks over the debt ceiling weighed on markets, Madden said.

“I think what's really happening this week, and probably going into next week, is U.S. markets are trading political headlines, because earnings season by and large has finished and so it's all eyes on the debt ceiling talks right now,” he said.

Debt limit talks came to an abrupt standstill Friday, and it’s not clear when the talks will resume even as the U.S. approaches a potential crisis. A White House official said there are “real differences” that are making talks difficult.

Meanwhile in Canada, new data on retail sales for March were released, with inconclusive results, said Madden: sales were lower for the month, due in part to auto and gasoline sales, but Statistics Canada said early estimates point to a gain for April.

“It's not really unambiguously a sign that the economy is really going into the tank, but it's not super bullish either,” said Madden.

Investors are waiting with “bated breath” for Canadian banks to release results next week, capping off earnings season north of the border, he said.

In the U.S., Federal Reserve chairman Jerome Powell indicated that a pause in interest rate hikes is likely in June, which would be the first pause since the central bank began hiking its key rate more than a year ago to fight inflation.

Markets are still pricing in rate cuts by the end of the year even though Powell has been clear that the Fed intends to keep rates higher for longer, said Madden.

“Investors are picking a fight with the Fed and calling their bluff ... there’s a bit of a tug of war,” he said, adding that from his firm’s perspective, “we believe Mr. Powell, we don’t believe the markets.”

The Canadian dollar traded for 74.06 cents US compared with 74.07 cents US on Thursday.

The July crude contract was down 25 cents at US$71.69 per barreland the June natural gas contract was down less than a penny cents at US$2.59 per mmBTU.

The June gold contract was up US$21.80 at US$1,981.60 an ounce and the July copper contract was up four cents at US$3.73 a pound.

— With files from The Associated Press

This report by The Canadian Press was first published May 19, 2023.

Companies in this story: (TSX:GSPTSE, TSX:CADUSD=X)

Rosa Saba, The Canadian Press