Canadian Stocks Close Modestly Lower

Image Source : Krish Capital Pty Ltd

Index Update:  Canadian stocks closed modestly lower on Wednesday as traders refrained from big moves and dissected the implications of last week's rate cut by the Bank of Canada amid assurances on the nation's economic future by Prime Minister Mark Carney. After moving to the upside early in the session, the benchmark S&P/TSX Composite Index gave back ground over the course of the trading day before closing down by 58.68 points (or 0.20%) at 29,756.95.

Macro Update:  The Bank of Canada reported that exports dropped almost 27% in the second quarter of 2025, causing real GDP to contract by 1.6%. The unemployment rate climbed from 6.6% to 7.1% between February and August. Yesterday, while speaking at the Saskatchewan Trade and Export Partnership and the Greater Saskatoon Chamber of Commerce, Bank of Canada's Governor Tiff Macklem lamented that Canada waited too long to reduce its dependence on the US economy. Macklem acknowledged that the Canadian and global economies are on permanently lower paths due to high US tariffs. Canadian Foreign Affairs Minister Anita Anand is set to travel to China and India in the weeks ahead as Canada looks to improve its strained ties with the two major Asian economies. On the business front, according to WSJ reports, Canada's Bank of Montreal is exploring a potential sale of a few of its branches in the US that hold nearly $6 billion in deposits. Data released by Statistics Canada today revealed that Canada's manufacturing sales are expected to fall 1.5% in August.

Top Movers:  Among the individual stocks, Cenovus Energy Inc (3.25%), Vermillion Energy Inc (2.87%), Canadian Natural Resources Ltd (2.50%), and Finning Intl (3.13%) were the prominent gainers.

Our Stance:  While this elevated reading highlights the strength of the ongoing rally, it also places the index in overbought territory, raising the possibility of short-term consolidation or corrective pullbacks. In terms of support structure, the index is currently testing a critical near-term base around 29,500. This level has emerged as an immediate line of defense for bulls. A decisive break below 29,500 could trigger an additional downside, exposing the index to subsequent supports at 29,300 and 29,100.  

Commodity Update:  The U.S. dollar was steady on Thursday, holding its overnight gains, as traders weighed the prospect of a measured Fed easing cycle in the wake of a cautious tone from policymakers while awaiting data that may outline the impact of tariffs. Gold surged 0.02% to $3,768.50, silver advanced 0.17% to $44.26, and copper eased 0.14% to $10,357.05. Brent crude fell 0.30% to $69.09 after hitting seven-week highs, as a surprise decline in U.S. crude inventories added to signs of tighter supply, while heightened geopolitical tensions over Russia kept a risk premium in the market.

Technical Update:

The S&P/TSX Composite Index ended Wednesday’s session with a modest decline of 58.68 points (−0.20%), closing at 29,756.95. While the index experienced some profit-taking, the broader technical picture continues to lean bullish. From a trend perspective, the index remains firmly above its 21-period Simple Moving Average (SMA), which is serving as dynamic support and confirming that the short-term uptrend is still intact. The ability to sustain closes above this level suggests that buyers continue to dominate despite near-term volatility. On the momentum front, the Relative Strength Index (RSI) stands at 73.34, indicating a strong upward momentum. While this elevated reading highlights the strength of the ongoing rally, it also places the index in overbought territory, raising the possibility of short-term consolidation or corrective pullbacks. In terms of support structure, the index is currently testing a critical near-term base around 29,500. This level has emerged as an immediate line of defense for bulls. A decisive break below 29,500 could trigger an additional downside, exposing the index to subsequent supports at 29,300 and 29,100.