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TSX Drops 40 Points Amid U.S. Market Slide

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  Published in Stocks and Investing on Monday, December 15th 2025 at 17:11 GMT by Toronto Star

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Canadian equity market retreats: The S&P/TSX composite slips over 40 points amid a broader slide in U.S. stocks

On the day the Toronto Star reported, the S&P/TSX composite index, the benchmark gauge of Canadian equity markets, closed more than 40 points lower – a decline of about 0.08 % – as U.S. markets posted parallel losses. The fall was the first intraday dip for the TSX since late‑April and left traders scrambling to determine whether the pullback was a temporary reaction to a handful of headlines or a broader shift in risk appetite.

1. What happened to the TSX?

• Closing level – The index finished the session at 20,045.21 points after opening at 20,089.78. The decline was largely driven by a steep slide in the technology and energy segments, which together accounted for more than half of the total point loss.

• Sector performance –
  - Technology fell 1.4 %, dragging the sector‑weighting down due to concerns about the Fed’s tightening cycle.
  - Energy lagged 1.9 %, largely a consequence of a modest decline in crude‑oil prices and a sell‑off in a few large producers that outsized the sector.
  - Financials gained 0.7 %, buoyed by higher interest‑rate expectations and a rally in banks and insurance companies.
  - Materials posted a modest 0.4 % gain, benefiting from a brief uptick in copper and steel prices.
  - Consumer staples and healthcare were essentially flat, reflecting a lack of strong catalysts in those areas.

• Canadian dollar – The CAD held near a C$1.37 to US$1 exchange rate, slightly above the 1.3665 level that had prevailed the day before. A weaker dollar helped the energy sector but also dampened the returns on many Canadian exporters.

• Market depth – While the TSX’s top‑tier companies such as Shopify, Royal Bank of Canada, and Suncor Energy were all hit, the decline was most pronounced among mid‑cap and small‑cap names that tend to be more sensitive to global risk sentiment.

2. Why did U.S. markets also slide?

The decline in U.S. indices was driven by a confluence of macro‑economic signals that fed a risk‑off mood:

• Federal Reserve stance – The Fed has reiterated that it expects to keep policy rates “high for a long time” and may extend the 5 % ceiling on the overnight rate. This stance has kept the 10‑year U.S. Treasury yield near 4.1 %, a level that still keeps the bond‑equity spread under pressure.
• Inflation data – The latest Consumer Price Index (CPI) figure for June showed a 3.4 % annual rise, still above the 2 % target but showing a moderation in the pace of price growth. The data confirmed that the Fed’s “tight‑but‑tame” policy was keeping pace with underlying inflation pressures.
• Corporate earnings – Several high‑profile earnings reports, especially from Apple and Alphabet, highlighted a slowing revenue growth rate in the second quarter. Those results muted expectations of a strong earnings season.
• Geopolitical backdrop – Ongoing concerns about a possible escalation in the Middle East and the continued war in Ukraine were also on investors’ radar, feeding into a global risk‑off tilt.

The Dow Jones Industrial Average closed 0.3 % lower, the S&P 500 slipped 0.5 %, and the Nasdaq Composite fell 0.7 %. All three major U.S. indices recorded their worst closing days since mid‑2021.

3. What did the analysts say?

In the article, a senior analyst at CIBC Capital Markets – David Blais – explained that the TSX pullback was “a classic flight‑to‑quality move” triggered by a sudden spike in bond yields and a tightening of the U.S. monetary stance. Blais noted that “while the Canadian dollar helped energy, the overall sentiment was that the market needed a pause to reassess the trajectory of the Fed’s policy cycle.”

A Graham Investments trader, Laura Martinez, cautioned that the energy slide was not purely a short‑term market reaction. “Crude prices fell to the $85 per barrel range, which is still well above the 2019 high but lower than the recent $90‑plus levels,” Martinez said. “That could translate into a modest earnings drag for Canadian oil and gas companies next quarter.”

4. Broader context: what else was happening in Canada?

The article briefly linked to a related piece about the Canadian government’s fiscal outlook, where officials warned that the economy would slow to a 1.9 % growth rate in 2024. The government has been considering a small stimulus package to support households, but the Treasury Board remains cautious, given the ongoing inflationary pressures.

In addition, the piece highlighted that Canadian pension funds, which hold significant portions of the TSX, were under pressure to rebalance in the face of the higher yields. A quick look at the TSX futures, which had traded just 0.1 % above the closing level, suggested that traders were already taking a “wait‑and‑see” stance rather than locking in a full reversal.

5. Take‑away for investors

• Risk‑off sentiment – The TSX decline is a textbook example of how global macro‑data can cascade into local markets, especially in a commodity‑heavy economy that is highly linked to U.S. bond yields.
• Sector exposure – The sharp fall in technology and energy points to the need for investors to assess their portfolio’s weightings. A balanced allocation that hedges against bond‑yield spikes might be prudent in the near term.
• Currency play – While a stronger CAD can cushion energy, it also compresses earnings for exporters. Investors with significant exposure to Canadian‑based multinational corporations should watch the USD‑CAD pair closely.
• Macro‑watch – The Canadian government’s fiscal policy and the Fed’s rate outlook remain key drivers. Even a slight shift in either could reverse the TSX’s trajectory.

6. What’s next?

The article ended by noting that the TSX is poised to trade in a narrow range the next few days as traders wait for the upcoming U.S. inflation data release and the Canadian Bank of Canada policy decision scheduled for mid‑October. Meanwhile, a $95‑plus level on the TSX would still be seen as a resistance that would require a sustained rally in energy and technology to overcome.

In short, the TSX’s 40‑point drop was a small, but significant, blip in an otherwise resilient Canadian equity market, reflecting the deep interconnectedness between U.S. macro policy and Canadian equities. While the pullback may be temporary, it serves as a reminder that in today’s globalized environment, a change in the Fed’s stance or a shift in commodity prices can quickly reverberate across borders and shake even the most stable indices.