Canadian stocks are plunging sharply

Index Update:  Canadian stocks fell sharply on Friday, extending losses from the prior two sessions, as escalating Gulf War tensions fueled inflation concerns and drove investors away from riskier assets. The benchmark S&P/TSX Composite Index  traded firmly negative before settling at 31,317.23, up by 537.75 points (or 1.69%).

Macro Update:  The Strait of Hormuz, a narrow waterway off Iran's coastal region remains blocked for vessels carrying oil and energy from Arab nations. The U.S. Federal Reserve held interest rates at the current 3.50% to 3.75% range on Wednesday. Market participants have canceled their bets on lowering of interest rates by the Fed, with many of them anticipating a rate hike this year. The CME Group's FedWatch Tool was last seen indicating that traders were betting on a 12.40% chance of a "quarter-point rate hike" at the April meeting. The Bank of Canada elected to hold interest rates at the current 2.25% level. Data released by Statistics Canada today revealed that Canadian producer prices rose by 0.4% month-over-month in February, below market forecasts of a 1.1% increase. Producer Prices surged 5.4% in January compared to the same month in the previous year. A preliminary estimate revealed that retail sales in Canada increased by 0.90% from February.

Top Movers:  Among the individual stocks, Maple Leaf Foods (2.37%), Saputo Inc (1.36%), Metro Inc (0.80%), and Weston George (0.45%) were the prominent gainers.

Our Stance: The index continues to trade below its 21-period Simple Moving Average (SMA), which is acting as a key resistance level. Momentum indicators remain slightly weak, with the 14-period Relative Strength Index (RSI) at 30.26, suggesting fading strength in price action. On the downside, immediate support is seen near 31,300, with a break below this level potentially opening the door for further consolidation toward the 31,000 mark. 

Commodity Update:  The U.S. dollar showed signs of a rebound on Monday as escalating tensions in the Middle East dampened risk appetite, supporting safe-haven demand. Meanwhile, commodities witnessed broad weakness, with gold dropping 4.79% to USD 4,389.40 and silver declining 6.56% to USD 65.10. Copper slipped 0.58%, while Brent crude remained nearly flat near USD 112.18 amid mixed signals around supply risks and easing sanctions on Iranian oil exports.

Technical Update:

The S&P/TSX Composite Index edged lower on Friday, closing at 31,317.41, as profit-taking weighed on recent upside momentum. Despite the pullback, the broader technical outlook remains constructive, indicating a phase of healthy consolidation rather than a trend reversal. The index continues to trade below its 21-period Simple Moving Average (SMA), which is acting as a key resistance level. Momentum indicators remain slightly weak, with the 14-period Relative Strength Index (RSI) at 30.26, suggesting fading strength in price action. On the downside, immediate support is seen near 31,300, with a break below this level potentially opening the door for further consolidation toward the 31,000 mark.