04:20 PM EST, 11/15/2024 (MT Newswires) -- After posting a succession of record closes this week, Canada's main stock market, the Toronto Stock Exchange, on Friday dropped nearly 160 points amid some profit taking and renewed uncertainty around the outlook for the U.S. economy, amid concerns around any negative impact from there on Canada.

"The post-election euphoria for equity markets faded this week, as investors snapped back to reality, and thus came gravity," BMO Chief Economist Douglas Porter noted.

"A combination of cautious comments from Jay Powell, so-so inflation readings, and a dawning realization of the costs and tradeoffs involved in the incoming [President-elect Trump] Administration's policy proposals weighed on sentiment" Porter wrote.

The resources heavy TSX closed today down 158.99 points or 0.6% at 24,890.68, not helped by lower commodity prices. Of sectors, most were lower, led by Health Care, down 1.25%, and Energy, down 1.15%. Base Metals was up 0.6% despite a lower gold price.

Among commodities today, gold edged lower late afternoon on Friday following five losing sessions as the dollar eased and U.S. October retail sales came in higher-than-expected. Gold for December delivery was last seen down $5.90 to US$2,567.00 per ounce.

Also, West Texas Intermediate crude oil closed lower following three days of gains on indications Chinese demand remains light and as U.S. inventories rose last week. WTI crude for December delivery closed down $1.68 to settle at US$67.02 per barrel, while January Brent crude, the global benchmark, closed down $1.52 to US$71.04.

For the United States, Desjardins said despite setbacks like hurricanes and strikes, the U.S. economy is "holding up". It noted Federal Reserve Chair Jerome Powell said yesterday there is no need to hurry to cut rates, and it noted retail sales and industrial production data published today provided no evidence to the contrary. For the time being, Desjardins is still expecting a 25 point cut in December.

But Desjardins also said the risks remain skewed towards a slower pace of easing. "Over the longer term," it added, "we'll need to see how the policies that the Trump administration implements next year will affect US production. In the short term, before tariffs come into effect, Trump's win could actually boost production. As for the medium term, the higher cost of imported inputs and uncertainty over a potential trade war could bite."

BMO's Porter, said the "sturdy performance" by the TSX is all the more notable in light of the very real threat of blanket U.S. tariffs. One question his team fielded this week was around why BMO had not yet adjusted its inflation outlook, given the prospect of tariffs and other inflationary aspects of Trump's proposals. Porter cited three main reasons: we can't quantify the impact until we know the precise contours of policy; we don't know how trading partners, companies and markets will respond, and all could dampen the inflationary impact to some degree; and there are already some offsetting factors coming into play.

For example, Porter noted, oil prices are currently almost US$10 below BMO's assumptions for 2025, putting downside risk on the inflation outlook. Similarly, the US dollar index has popped more than 6% in the past six weeks, which could alone nearly negate a 10% tariff hike. Finally, Porter noted the Consensus Economics survey, conducted early this week, revealed that the average forecaster had added just one lone tick to the 2025 U.S. inflation call (2.3% from 2.2% a month ago), while the calls on the Euro Area (1.9%) and Japan were left unchanged (2.1%), and Canada's has been trimmed a tick (to 2.0%)