Canadian, U.S. markets rally after differing labour market reports

A signboard is displayed at the TMX in Toronto. (Chris Young/The Canadian Press)

Canadian and American markets moved higher on Friday, with the TSX posting a new all-time closing high, even as jobs reports in both countries painted different economic pictures. 

The S&P/TSX composite index closed up 212.59 points at 22,264.38.

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In New York, the Dow Jones industrial average was up 307.06 points at 38,904.04. The S&P 500 index was up 57.13 points at 5,204.34 and the Nasdaq composite was up 199.44 points at 16,248.52, both gaining more than one per cent.

The U.S. labour market continued to show surprising strength, adding 303,000 workers to employers’ payrolls in March. 

The market took the report at face value, said Brian Madden, chief investment officer with First Avenue Investment Counsel.

Markets have tended in recent months to take strong economic reports as bad news because they indicate that central banks could continue holding interest rates for longer instead of cutting. 

But this time, markets took the good news as good news, said Madden.

“The markets are taking this in stride,” he said, as the outlook for corporate profits outweighs the potential for fewer and later rate cuts. 

Markets have flip-flopped this week as U.S. Federal Reserve officials made at times competing comments about whether the central bank would cut rates at all in 2024, and if so, when and how many. 

It was a different story in Canada on Friday, at least in terms of the data — “a tale of two cities,” said Madden.

Canada’s unemployment rate jumped to 6.1 per cent and the country lost 2,200 jobs, faring worse than expected.  

“There's no way to sugar-coat that,” said Madden. “That's bad.”

Canada’s economy has not weathered the interest-rate storm nearly as well as the U.S. has, though neither country has started cutting interest rates. 

Yet markets also seemed to take this report as positive, with the TSX gaining almost one per cent on the day. 

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“The market shaking it off and rallying on high volume and broad-based participation is a bullish sign,” said Madden. 

If the economic data in Canada continues in this vein, he said, the Bank of Canada could follow through on what many expect and start cutting interest rates as early as June. 

But Friday’s report won’t change its mind about its rate decision next week, he added. The central bank is widely accepted to hold its key rate steady at five per cent on Wednesday.

The Canadian dollar traded for 73.54 cents U.S. compared with 74.05 cents U.S. on Thursday.

The May crude oil contract was up 32 cents at US$86.91 per barrel and the May natural gas contract was up two cents at US$1.79 per mmBTU.

The June gold contract was up $36.90 at US$2345.40 an ounce and the May copper contract was down a penny at US$4.24 a pound.

— With files from The Associated Press

This report by The Canadian Press was first published April 5, 2024