04:23 PM EDT, 05/10/2024 (MT Newswires) -- After running up to an all time record high of 22,470 early in Friday's session, Canada's main stock market, the Toronto Stock Exchange, came under selling pressure as a stronger than expected headline growth figure in today's job data turned into intraday anxiety over the possibility the numbers could lead to an extended pause on rate cuts.

Today, the resources heavy TSX wasn't helped by mixed commodity prices.

In the end, the S&P/TSX Composite Index closed down 66.9 points at around 22,308.93 -- more than 150 points off its new record high.

On the key jobs data, net total Canadian employment increased by 90,000 in April, a much stronger than consensus print following an unexpected decline for the prior month.

Douglas Porter, Chief Economist at BMO Economics, wrote in his weekly 'Talking Points' note the "hearty" jobs report will give the Bank of Canada "some pause". He noted: "When it was already a close call on whether to begin trimming rates, a rollicking headline jobs gain is hardly the cover needed to begin the process."

Porter said BMO is "very reluctant" to suggest that the BoC's June rate decision may hinge on one lone economic indicator -- the CPI report on May 21. Accordingly, BMO points out the first hurdle will be next Wednesday's U.S. CPI. "Another sour result there may well sink rate cut prospects overall, as it would reinforce the message that inflation truly is stuck at just above 3%."

Porter noted BMO's call, which is mostly in line with consensus, is "hardly reassuring", with total prices expected to rise 0.4%, and core up an "uncomfortable" 0.3%. Porter said while these are "just mild enough" to trim the annual rates (to 3.4% and 3.6%, respectively), he noted that in the 15 years to 2021, there had never been a single month when U.S. core CPI topped 0.3%. "We have seemingly become inured to higher readings. Suffice it to say that in such an environment of still-meaty U.S. inflation, BoC hesitancy is perfectly understandable."

Meanwhile, Derek Holt, Vice-President & Head of Capital Markets Economics at Scotiabank in a note today maintained that consensus is "too bearish on Canada's economy and too bullish on rates" with an underpriced curve relative to the US. He said jobs offer the latest piece of evidence. "Details point to strong underlying momentum in GDP growth that adds to inflation risk with a mild offset being mixed data on wages".

Holt noted June BoC cut pricing was about 4-plus basis points lower post-data [at the time of his writing] and indicating less than 50-50 odds of a quarter point cut on June 5. Only about 10bps was priced for June and markets were pricing only about 50bps of cuts for the year as a whole. CPI the week after next and GDP later this month, plus external factors like next week's US CPI, will further inform pricing, he added.

Of commodities, gold traded higher for a second day midafternoon on Friday, regaining ground lost to a price correction after the precious metal set a record high last month. Gold for June delivery was last seen up $30.20 per ounce to US$2,370.50 per ounce, still below the April 19 record of US$2,413.40 but recovering from the month low of US$2,302.90 on April 30.

But West Texas Intermediate crude oil closed lower, giving up early gains that came on signs of improving demand from China as the prospect of US interest-rate cuts diminish. WTI crude oil for June delivery closed down $1.00 to settle at US$78.26 per barrel after falling off a session high of US$79.96, while July Brent crude, the global benchmark, closed down $1.09 to US$82.79.

Among sectors, most were higher, led by the Battery Metals Index up 2% and Health Care up 1%. Decliners were led by Info Tech down 2% and Energy down 1.2%.

Still on the equity market, BMO's Brian Belski published a note entitled 'Canadian Strategy Snapshot: Factor Performance Observations of the TSX'.

Bottom Line, Belski noted in a summary of the report that, according to BMO's models, there has been "both a fundamentally driven broadening out of performance and definitive shift toward more cyclical factors in the TSX so far this year". In fact, he said, all eight of BMO's factor profile categories and 40 of the 57 individual factors the bank follows are outperforming the S&P/TSX year-to-date. Belski noted this is in stark contrast to 2023 when only two of the eight and 17 of the 57 individual factors outperformed the market, and this is the sharpest breadth of factor outperformance since 2020. "From our perspective," Belski added, "this fundamentally driven broadening out of performance will be a key tailwind for Canadian equities through the second half of the year."

Additionally, Belski said, the Canadian market has "seen a clear cyclical shift from value to growth factors". In 2023, he noted, the more defensive valuation and capital usage factors were the only factors to outperform. "This year," Belski added, "more cyclical factors such as growth (both trailing and forward growth) and high-risk factors have been the top-performing categories. Interestingly, this is the mirror image of US factor performance, where more cyclical factors outperformed in 2023, and now valuation and capital usage factors are top performing categories year-to-date."

"From our perspective," Belski said, "this is yet another sign that Canadian equities are poised for a strong catch-up trade in the coming quarters. Overall, we expect this dynamic to proceed throughout 2024 as the market continues along its normalization process. Furthermore, we believe a Canadian GARP-oriented strategy is well positioned to outperform in this environment."