Canada’s stock market delivered an impressive performance on Friday, with Toronto’s benchmark S&P/TSX Composite Index climbing 311 points—a full 1%—to close at 30,471.68. The milestone marked the index’s sixth consecutive day of gains and set yet another record high, surpassing the previous peak reached just 24 hours earlier. Over the full trading week, the TSX advanced a robust 2.4%.
The rally came despite troubling signals from Canada’s real economy. Fresh data revealed that the country’s services sector—which encompasses everything from restaurants to professional services—contracted more sharply in September than expected. Businesses cut jobs, and the backlog of outstanding work plunged to its lowest level in five years, according to S&P Global’s closely-watched Purchasing Managers’ Index (PMI).
Yet investors appeared unfazed by the weakness, embodying a paradox that has become increasingly familiar in financial markets. “From a big picture point of view, we seem to be back to a situation where bad news for the economy is good for the markets,” explained Elvis Picardo, a portfolio manager at Luft Financial, iA Private Wealth. “On the Canadian side, we had pretty soft data but that was shrugged aside.”
The Rate Cut Calculation
The counterintuitive market reaction stems from investor expectations about monetary policy. Weak economic data strengthens the case for the Bank of Canada to continue cutting interest rates, which it reduced last month to 2.50%—the lowest level in three years. Lower rates make borrowing cheaper, boost corporate profits, and enhance the relative attractiveness of stocks compared to bonds. Money market traders are now pricing in a strong probability of additional rate cuts when policymakers meet later this month.
Shopify Steals the Spotlight
Friday’s star performer was Shopify, Canada’s e-commerce giant and the country’s second-largest publicly traded company with a market capitalization approaching $150 billion. The Ottawa-based firm’s shares surged 6.5%, propelling the stock to an all-time closing high and even surpassing the intraday peak it reached during the pandemic-era tech boom of November 2021.
The enthusiasm surrounding Shopify appears linked to the artificial intelligence wave sweeping through technology markets. OpenAI recently unveiled a feature allowing users to make purchases directly through ChatGPT, with Shopify serving as one of the platform’s initial retail partners alongside Etsy. This integration positions Shopify at the intersection of AI and e-commerce—two of the hottest themes in modern investing.
“Shopify could be benefiting from enthusiasm for anything AI-related,” Picardo noted. “We don’t have too many companies with that pedigree in Canada.”
Canada’s Tech Deficit
Indeed, Shopify’s outsize importance to Canadian markets highlights a structural difference between the TSX and its American counterparts. Technology stocks account for just 11.5% of the Toronto exchange’s total weighting—a stark contrast to the S&P 500, where tech companies now represent a staggering 50% of the index. This concentration in U.S. markets reflects the dominance of mega-cap firms like Apple, Microsoft, Nvidia, and Alphabet, none of which have Canadian equivalents.
The technology sector broadly rose 1.5% on Friday, making it one of the day’s best performers and pulling the overall market higher.
Broad-Based Gains
Beyond tech, Friday’s rally was remarkably widespread. Industrials advanced 1.1%, benefiting from positive sentiment around infrastructure and manufacturing. The energy sector—which carries significant weight in the resource-heavy Canadian index—climbed 1% as oil prices recovered some ground. West Texas Intermediate crude settled 0.7% higher at $60.88 per barrel, clawing back a portion of the week’s earlier losses ahead of an expected production increase by eight OPEC+ countries beginning Sunday.
In total, nine of the TSX’s ten major sectors finished in positive territory. Healthcare stood as the lone exception, declining 1%.
Looking Ahead
The TSX’s winning streak reflects growing investor confidence that Canadian monetary authorities will continue supporting the economy through lower borrowing costs, even as economic fundamentals remain fragile. Whether this momentum can be sustained will likely depend on upcoming economic data and the Bank of Canada’s next policy decision—a delicate balancing act between combating economic weakness and managing inflation expectations.
For now, though, Canadian investors are riding high on a rare confluence of factors: central bank support, AI-driven tech enthusiasm, and the peculiar market logic that sometimes transforms economic challenges into investment opportunities.
