S&P/TSX composite closes up nearly 100 points, U.S. stock markets mixed

Canada’s main stock index closed up nearly 100 points Friday, helped by strength in energy and financial stocks, while U.S. markets were mixed.

Markets diverged as investors pulled away from risk-on bets like tech stocks and favoured dividend and low-volatility stocks, said Ian Chong, portfolio manager at First Avenue Investment Counsel.

“That risk-off is largely driven by geopolitical risks flaring up again.”

Israel’s strike on Iran overnight raised tensions, which eased Friday but still left markets on edge, said Chong.

“Iran did say that they would not retaliate, which kind of de-escalated tensions, but here we are Friday afternoon heading into the weekend, and I don’t think anyone really wants to take that risk.”

The flare-up helped send oil up to around US$90 per barrel in early morning trading. It fell back down as concerns eased, with the benchmark U.S. May crude contract settling up 41 cents at US$83.14 per barrel. Energy stocks still got a small boost on the day.

The TSX composite energy index was up just over 0.5 per cent, similar to a climb in the financials index, while the flight to safety also helped boost utilities by 0.9 per cent and telecoms by 0.6 per cent.

Overall, the S&P/TSX composite index closed up 98.93 points at 21,807.37.

The risk-off sentiment helped make information technology one of the biggest drags on the index, down almost 0.7 per cent, as names like Constellation Software Inc. closed down more than one per cent.

U.S. markets saw bigger downswings on technology, including Netflix that was down around nine per cent after investors reacted poorly to its plans to reduce the financial metrics it disclosures. The streaming service did however blow past expected subscriber adds in its latest results.

The drop from Netflix, along with other heavyweights like Nvidia Corp. down 10 per cent, led the Nasdaq composite to close down 319.49 points, or 2.05 per cent, at 15,282.01. The Dow Jones industrial average was up 211.02 points at 37,986.40 and the S&P 500 index was down 43.89 points at 4,967.23.

The pullback from big growth bets also comes as investors are expecting fewer rate cuts this year from the U.S. Federal Reserve.

A number of Fed members spoke this week noting the inflation data has been running hot, making higher-for-longer rates even more likely, said Chong.

“That is a very, very big shift from the beginning of the year, when futures were pricing in six rate cuts, and then four, and then three, now we’re barely at two. So investors are definitely trimming risk based on this reset of rate expectations.”

While Canadian quarterly earnings start in earnest next week, results so far out of the U.S. point to solid earnings but more cautious guidance for the year ahead, he said.

“So that’s another reason why markets could take a bit of a breather, take some risk off the table.”

The geopolitical concerns further dampening risk appetites have also helped boost commodities, especially gold which keeps pushing highs.

The June gold contract was up US$15.80 at US$2,413.80 an ounce and the May copper contract was up six cents at US$4.50 a pound.

The Canadian dollar traded for 72.74 cents US compared with 72.65 cents US on Thursday.

The May natural gas contract was down one cent at US$1.75 per mmBTU.

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