Canada's benchmark stock index surged on Monday, closing at 23,847 points in a broad-based rally that pushed the S&P/TSX Composite to levels not seen since March 2024. The move was led by the energy and financial sectors, which together account for more than 50% of the index's weighting, and was amplified by stronger-than-expected earnings from two of the country's largest banks.
West Texas Intermediate crude climbed 1.8% to US$78.40 per barrel following a surprise drawdown in US inventories reported by the Energy Information Administration on Friday, lending significant support to TSX-listed oil producers. Canadian Natural Resources, Cenovus Energy, and Suncor Energy each rose more than 2.5%, with Suncor briefly touching a 52-week high before paring some gains into the close.
Banks Lead the Charge
The financial sector's contribution to Monday's rally was substantial. Royal Bank of Canada rose 1.9% after pre-releasing its third-quarter earnings guidance ahead of schedule, signalling net interest margin expansion that exceeded Bay Street consensus estimates. Toronto-Dominion Bank gained 1.4%, and Bank of Nova Scotia added 1.2% as investors rotated into Canadian financials on expectations that the Bank of Canada will hold rates at 2.75% through the remainder of the year.
"This is a classic late-cycle rotation," said Elaine Forsyth, chief investment strategist at TD Asset Management, speaking to Plauste on Monday afternoon. "When energy catches a bid at the same time that the banks are posting solid earnings, you tend to see outsized moves in the TSX because of its sector composition. The index is doing exactly what it's designed to do."
"The TSX is doing exactly what it's designed to do when energy and financials align."
— Elaine Forsyth, TD Asset Management
Tech and Industrials Also Contributed
Beyond the two dominant sectors, the rally had broader participation. Shopify added 4.3% after reporting quarterly earnings that beat expectations on both the top and bottom line. The company's guidance also exceeded analyst forecasts, pushing the stock above the $200 mark for the first time since late 2025. CGI Group rose 1.7%, and Constellation Software gained 0.9%.
The industrial sector rose 1.1%, driven by CP Kansas City, which announced a new freight agreement with the Mexican government that analysts estimate could add $180 million in annual revenue by 2028. Canadian Pacific shares closed up 2.1%.
What to Watch Next
Market participants will be watching closely for the Bank of Canada's next rate announcement, scheduled for September 3. The consensus view among Bay Street economists is that Governor Macklem will hold at 2.75%, though Monday's controversy on CBC's The National has introduced an unusual degree of public scrutiny into the central bank's communications approach. Any deviation from the script in the Bank's next public statement could move markets materially.
On the macro front, Statistics Canada releases June retail sales data on Thursday, followed by the monthly GDP estimate on Friday. Economists are forecasting retail sales growth of 0.3%, with the GDP print expected to confirm a 2.1% annualized expansion rate for the second quarter — the strongest in six quarters.