04:36 PM EDT, 10/04/2024 (MT Newswires) -- Canada's main stock market, the Toronto Stock Exchange (TSX), on Friday avoided recording a hat trick of losses in style, closing at a record high spurred by an unexpectedly robust U.S. job market.

The S&P/TSX Composite Index closed up 194.33 points to 24,162.83, having earlier posted an all time intraday high of 24,179.28, topping the previous high of 24.033.99 set on Oct.1. Among sectors Friday, most were higher, led by Info Tech, up 2%, Base Metals, up 1.8%, and Energy, up 1.3%. The Battery Metals Index was down 2.1% and Telecoms was down 0.2%.

The rise follows the release of a better than expected U.S. employment report today that reinforced the resilience of its economy and seemed to take 50 basis point cuts off the table for the Federal Reserve, as well as for the Bank of Canada (BoC).

Worries among skittish market watchers that today's data would point to a weakness in labor markets across North America, and the need for a front loading of rate cuts, had seen the TSX drop over the last two days, from its Tuesday record.

On the day's big economic news, Derek Holt, Vice-President & Head of Capital Markets Economics at Scotiabank, noted U.S. nonfarm payrolls "powered forward" by posting a quarter-million gain (+254k) alongside a net positive revision of 72k extra jobs over the prior two months. He said when the September beat is combined with the revisions it translates into more than double the number of extra jobs in the U.S. economy than consensus expected.

Holt also noted cumulative pricing for rate cuts by year end was shaved by 8bps to about 58bps in Fed funds futures which mostly takes out market pricing one for the Fed's next two remaining meetings this year to end with a 50 basis point (bps) cut. He said the dollar was broadly stronger, but added an offsetting influence for foreign-exchange traders came via repriced expectations for foreign central banks. For example, he noted, market pricing for cumulative rate cuts by the Bank of Canada over the remaining two meetings this year was shaved by about 7bps to 63bps, which will be further informed by next Friday's Canadian jobs report.

This matched recent commentary from UBS, which noted the BoC's increased consideration of downside risks. The question UBS asked is: does guarding against downside risks imply the need for a front loading of easing, potentially 50bp cuts? UBS argues that depends on the data to come. It noted the next policy meeting will take place October 23 with the September employment report released October 10 and the September inflation data out October 15. These will be important markers in tipping the balance on the pace of cuts to come, UBS added.

BMO economist Douglas Porter noted that for months, Governor Macklem has been at pains to tell Canadians the BoC can carve out an independent path from the Fed. And, Porter said, the Canadian economy has "certainly gone on its own not so merry way" in the past year, noting GDP here grew just 0.9% y/y in Q2 versus 3.0% for the U.S. economy.

"The reality is that a hale and hearty U.S. economy this deep into the cycle is good news for the Canadian outlook, and implies less urgency for the Bank. Expectations of more aggressive rate cuts had earlier been stoked by the Fed's 50 bp step, as well as Macklem's own dovish remarks. But market pricing is now leaning heavily back to more modest 25 bp cuts at each of the remaining decisions in 2024."

For now, BMO is sticking with its current call for a series of 25 bps rate cuts by the BoC, ultimately taking the overnight rate down from 4.25% to 2.5% by next summer. Porter said: "While there is clearly the lingering risk that the Bank may step up the pace -- Governor Macklem has explicitly said so -- a still-firm U.S economy tones down the urgency."

Porter added: "Not unlike Treasuries, the domestic bond market came to a similar conclusion this week, with 2-year GoC yields bouncing nearly 30 bps to 3.2%, leaving them just a snick above 10-year yields, which also jumped more than 20 bps on the week. Still, there is little debate that the downward direction for rates over the next year has not wavered, and that is even more so the case in Canada, where the landing has been far from soft."

Of commodities today, West Texas Intermediate crude oil closed with another gain, pushing higher for a fourth day as the market awaits Israel's response to Iran's missile attack this week.

WTI crude for November delivery closed up $0.67 to settle at US$74.38 per barrel, while December Brent crude, the global benchmark, closed up US$0.43 to US$78.05.

But gold traded down late afternoon on Friday, moving sharply lower as the dollar and yields jumped after the U.S. jobs data. Gold for December delivery was last seen down $9.30 to US$2,669.90 per ounce.