TSX cedes much of weekly gain after 'too strong' U.S. jobs data

By Fergal Smith

TORONTO (Reuters) - Canada's main stock index fell on Friday, barely holding in positive territory for the week, as the prospect of further aggressive tightening by the Federal Reserve offset the boost to energy shares from higher oil prices.

The Toronto Stock Exchange's S&P/TSX composite index ended down 395.88 points, or 2.1%, at 18,583.13. For the week, it was up 0.8% after giving back much of the 5% rally it made over the course of Monday and Tuesday.

Wall Street stocks also fell sharply after a report showing a solid U.S. jobs gain in September increased the likelihood the Fed will barrel ahead with an interest rate hiking campaign many investors fear will push the U.S. economy into a recession.

"Employment numbers in the U.S. are too strong for now," said Allan Small, senior investment advisor of the Allan Small Financial Group with iA Private Wealth. "It looks like central banks will continue their aggressive rate hikes and that's not what the market wants to see."

The Canadian economy also added jobs last month, supporting expectations for further tightening by the Bank of Canada.

Higher interest rates are a particular headwind for technology and other high growth sectors, reducing the value to investors of the future cash flows that companies in those sectors are expected to produce.

The Toronto market's tech sector fell 4.4%, with the shares off e-commerce giant Shopify Inc down 9.6%, while healthcare tumbled 11.6% as some cannabis producers gave back all of the previous day's sharp gains.

Heavily weighted financials lost 2.4%, while the materials group ended 3.8% lower.

In contrast, energy was up 0.2%, lifting its weekly advance to 15%, which was the biggest since November 2020, as oil benefited from the OPEC+ decision to slash output.

U.S. crude futures were up 4.7% on Friday at $92.62 a barrel.

(Reporting by Fergal Smith; Additional reporting by Shashwat Chauhan in Bengaluru; Editing by Richard Chang)