The Toronto Stock Exchange dropped on Friday as investors weighed fresh economic data pointing to resilient consumer spending and an improving housing market, while lower gold prices dampened sentiment.
The S&P/TSX Composite Index closed down 101.92 points, or 0.3%, to 34,857.34, as losses in battery metals, health care and utilities stocks outweighed gains in the energy, industrials and technology sectors.
Energy led gainers, up 0.67%, with Industrials and Information and Technology, up 0.21% and 0.31%, respectively. Battery Metals Index led decliners, down 2.69%, with Health Care, down 0.70%, Utilities, down 0.41%, Telecom, down 0.24%, Base Metals, down 0.21%, and Financial, down 0.05%.
In commodities, gold prices fell on Friday even as the dollar retreated from a 13-month high reached after the Federal Reserve indicated it may raise interest rates to curb rising inflation. Gold for July delivery was last seen down 1.7% to US$4,172.90 per ounce.
Meanwhile, oil prices edged higher on Friday as the postponement of U.S.-Iran talks and renewed hostilities between Israel and Hezbollah in Lebanon raised concerns about stability in the Middle East and the durability of a recently reached ceasefire. West Texas Intermediate crude oil for July delivery was last seen up 1.2% to US$77.54 per barrel, while August Brent oil was up 0.9% to US$80.57.
On the economic front, fresh data showed Canadian consumer spending remained resilient in April and appeared to strengthen further in May. Canada's retail sales rose 0.5% month over month to $73.0 billion in April, in line with expectations, while preliminary data for May indicates a strengthening of consumer spending amid a surge in gasoline prices, according to the country's statistical agency.
April's sales were up in five of nine subsectors, led by increases at gasoline stations and fuel vendors, noted Statistics Canada in a statement. The April retail sales increase was similar to the 0.6% month-over-month consensus gain figure provided by MUFG in a note earlier Friday. Core retail sales, which exclude gasoline stations and fuel vendors and motor vehicle and parts dealers, were down 0.7% month over month in April. StatsCan also provided an advance estimate of retail sales, which suggests that sales increased 1.0% month over month in May.
Retail sales surged in six provinces in April. The largest provincial increase in dollar terms was observed in Ontario (+0.5%), boosted by higher sales at motor vehicle and parts dealers.
On Friday's retail sales data, CIBC Economics said rising fuel costs are weighing on Canadian household spending, with higher gasoline prices eroding real consumption through the spring.
Overall, consumer spending appears to have stalled in Q2 after a strong start to the year, with elevated pump prices squeezing discretionary demand, according to CIBC. Still, the recent pullback in fuel prices and additional government support for households are likely to provide a cushion for spending later in the year, pointed out Andrew Grantham at CIBC.
Canada's housing resale market is showing signs of recovery, with recent gains largely fueled by a resurgence in activity in the province of Ontario, the country's largest real estate market, said National Bank of Canada Capital Markets in a note. Home sales in Canada jumped by 5.5% from April to May, the second rise in a row following five months of decline, wrote the bank.
This "robust" advance in sales was driven by increases in eight of the 10 provinces. Ontario, which saw an 8.8% month-over-month climb in sales, contributed the bulk of the national improvement, stated National Bank. According to market data, 71% of the increase in home sales recorded between March and May originated in Ontario.
Besides, in a bid to boost the economy, Canada on Friday imposed a temporary 10% tariff on imports of canned vegetables, excluding shipments from the United States, according to a Reuters report. The measure is seen as a move aimed at supporting domestic producers facing increased competitive pressures.
The tax takes effect immediately and will remain in place for up to 200 days. Imports from Mexico, Israel, Chile and certain developing countries are exempt under Canada's existing trade obligations, the Finance Department said.