On Friday, Canada’s primary stock index experienced a slight decline due to the decline of energy, technology, and base metals. Similarly, U.S. markets also ended the day on a downward trend after a week filled with economic data and the Federal Reserve’s decision to pause interest rates.
Despite the slight decline, the markets still finished the week strong, according to Monda Mahajan, Senior Investment Strategist with Edward Jones.
“I believe we are just taking a breather before the long weekend here in the U.S.,” she explained.
The S&P/TSX composite index closed 51.98 points lower at 19,975.37.
In New York, the Dow Jones Industrial Average saw a decrease of 108.94 points, closing at 34,299.12. The S&P 500 index fell 16.25 points to 4,409.59, while the Nasdaq Composite dropped 93.25 points to 13,689.57.
The major news of the week was the Federal Reserve’s decision to hold its key interest rate steady, which was expected on Wednesday. However, the central bank indicated the possibility of two more rate hikes this year to combat inflation.
Initially, investors reacted negatively to the announcement, but the following day, the markets turned more optimistic as they digested the news and statements made by Chairman Jerome Powell.
Powell stated that the central bank acknowledges progress regarding inflation and suggested that it might be appropriate for rates to increase at a more moderate pace.
Another significant development this week was the broadening of the equity rally, which had previously been limited to tech, communications services, and consumer discretionary sectors, as noted by Mahajan.
“We’re seeing more participation from areas like industrials and materials, which reflects increased confidence in the health of the U.S. economy,” she explained.
Investors received a mix of economic reports this week, including May’s cooling inflation, unexpectedly strong retail sales, higher-than-expected jobless benefit applications, and contracting manufacturing. Mahajan predicts a negative earnings season ahead and expects some volatility in the second half of the year as conditions continue to soften. However, she also sees this as an opportunity to position in equities and fixed income.
The Canadian dollar held steady at 75.77 cents US compared to 75.46 cents US the previous day.
The August crude contract rose by $1.12 to reach $71.93 per barrel, while the July natural gas contract increased by 10 cents to $2.63 per mmBTU.
The August gold contract saw a slight increase of 50 cents, reaching $1,971.20 per ounce, and the July copper contract dropped by a penny to $3.89 per pound.
— With files from The Associated Press
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