This was a strong week for North American stocks, with both the US and Canada pushing to record highs. But the interesting part is how differently they got there. Wall Street rode a cooling inflation report, while Toronto rode a surge in oil and gold. Here is the full picture.
How did US markets do this week?
The US market notched its third straight weekly gain, driven by the event everyone was waiting for. On Wednesday, the July inflation report came in cool and in line with forecasts, at 3.4% headline and 2.5% core. The relief pushed the S&P 500 above the 7,700 level for the first time ever, and Treasury yields eased.
Then Friday brought a reality check. Two soft data points rattled investors: retail sales fell 0.6% in July, the worst drop in over a year, and the University of Michigan consumer sentiment index slid to 51, well below expectations. The double miss raised fresh worries about the health of the American consumer, coming on top of the weak jobs report from the prior week. Stocks slipped modestly on Friday as a result, with the Nasdaq closing near 26,730 and the Dow around 53,730, though the week still finished green. The VIX fear gauge stayed calm near 14.
How did the Canadian market (TSX) do?
Canada had an even better week, and it barely needed Wall Street's help. The S&P/TSX Composite climbed to a series of fresh record highs, pushing near 36,800 and posting its longest daily winning streak since April. The engine was commodities, exactly the sectors that dominate the Canadian index.
- Energy surged as oil prices jumped. Crude rose after the US threatened an indefinite naval blockade of Iran, reviving fears about global supply. That lifted heavyweights like Enbridge (ENB.TO) and Canadian Natural Resources (CNQ.TO). You can track the move on our oil price page.
- Gold and silver miners rallied alongside precious metals, with the materials sector jumping. Agnico Eagle (AEM.TO), Barrick (ABX.TO) and Wheaton Precious Metals (WPM.TO) all advanced, tracking gold.
The Canadian dollar also firmed modestly, helped by the softer US data weighing on the greenback.
What drove the difference between the two markets?
It comes down to what each index is made of. The US market is dominated by technology, so it lives and dies by interest rates and the inflation and consumer data that drive them. The Canadian market is heavy in energy and materials, so it rides commodities. This week those commodities were hot, which is why the TSX quietly outperformed while the US wrestled with mixed economic signals. It is the same contrast we highlighted in our Canadian market recap, and a good reminder of why the two markets do not always move together.
What should investors watch next week?
Three things. First, oil, since the Iran situation is now the single biggest swing factor for Canadian stocks and a risk to US inflation if crude keeps climbing. Second, whether the weak US consumer data was a blip or the start of a trend, because that shapes the Fed's September decision. Third, the last of the Q2 earnings. For income investors riding the Canadian strength, our guide to the best Canadian dividend stocks is a good place to start.
Bottom line
Both North American markets hit records this week, but for opposite reasons: the US on cooling inflation, Canada on surging oil and gold. The cracks are showing in the American consumer, while Canada is enjoying a commodity tailwind. Records are nice, but the Friday wobble in the US is a reminder that this rally still depends heavily on the data staying friendly. Next week, keep one eye on oil and the other on the US consumer.
This article is for informational purposes only and is not financial advice. Always do your own research before investing.Screen stocks and compare valuations with our Stock Screener.
