The S&P/TSX Composite Index, which tracks the biggest Canadian companies, is on track for a weekly loss after the latest Bank of Canada (BoC) interest rate decision. The blue-chip index retreated to C$25,410, a few points below the year-to-date high of C$25,790.
Bank of Canada decision
The main catalyst for the TSX Composite Index was the actions by the Bank of Canada, which continued its interest rate cuts.
It has been in a constant rate cut cycle, moving the benchmark rate from 5.0% earlier this year to 3.25% today. Officials hinted that there will be more rate cuts ahead in a bid to support the economy.
The ongoing rate cuts have helped to bring more investors to Canadian stocks by making government bonds less attractive.
Most importantly, the cuts have helped to devalue the Canadian dollar against the US dollar and other currencies. The USD/CAD pair rose to a high of 1.4240, its highest level since April 2020. It has risen by almost 20% from the lowest level in 2020.
A weaker Canadian dollar often supports exporting countries, especially those selling their items to the United States.
Analysts expect the BoC to continue cutting interest rates as the economic weakness persists. One reason why the economic growth has slowed is that energy prices have continued falling in the past few weeks.
Brent, the global benchmark, retreated to $73, while the West Texas Intermediate (WTI) has moved to $70. This price action is notable because Canada is the fourth-biggest energy producer in the world.
Top Canadian stock movers in 2024
Most companies in the TSX Composite index have done well this year as their earnings growth continued.
Gold mining companies have been some of the best-performing companies as prices surged to a record high. Agnico Eagle Mines stock jumped by 66% this year, while Franco Nevada has jumped by 20%. Wesdome Gold Mining stock jumped by over 80%, while Equinox Gold rose by 28%.
The other top-performing companies in the TSX Composite were Orla Mining, Aritzia, Kinross Gold, MDA, New Gold, IAMGold, and First Quantum Minerals.
These companies have benefited from the robust gold prices, a trend that will continue in the near term. With the US public debt surging, analysts expect that the price of gold will continue rising, benefiting Canadian miners.
TSX Composite bank stocks also did well this year. Bank of Montreal, popularly known as BMO, rose by 8%, while Bank of Nova Scotia is up by 21% this year.
The Canadian Imperial Bank (CIB) stock jumped by 47%, while Canadian Western Bank is up by almost 90%. National Bank of Canada rose by 33%, while the Royal Bank of Canada jumped by 32%. A key concern among analysts is that many Canadian banks are highly overvalued.
Some TSX companies also dropped sharply this year. Tilray Brands, a leading player in the cannabis industry, crashed by 43% in 2024. Blackberry fell by 17%, while Richelieu Hardware, BRP, and Parex Resources were the main laggards.
TSX Composite Index analysis
The weekly chart shows that the TSX Composite index has been in a strong bull run in the past few months. It has remained above the 50-week and 200-week Exponential Moving Averages (EMA).
The index has moved above the key psychological level at C$25,000. Also, the Relative Strength Index (RSI) and the MACD indicators have continued to point upwards, a sign that it has the momentum.
Therefore, there is a likelihood that the TSX index will continue rising as bulls target the next key resistance point at C$26,000.
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