Canadian Stocks Rebound on Technology and Banking Gains Despite Ongoing Services Sector Contraction

Toronto | EcoPulse24

Canadian stocks regained some of their losses during Wednesday’s session, as economic data pointed to a significant slowdown in activity. This reflects a mix of pressures on the services and industrial production sectors, countered by continued support from key sectors like technology and banking.

The S&P/TSX Composite Index finished Wednesday up about 0.5%, closing at 33,943 points, recovering part of the losses after a sharp sell-off in the previous session. The rebound was driven by strong gains in the technology sector, with Shopify shares jumping around 6%, Celestica up 5.1%, and CAE rising 4.4%.

The financial sector also provided support, as Bank of Montreal (BMO) climbed 1.3% and Toronto-Dominion Bank (TD Bank) rose 0.8%, helping offset declines in other stocks such as Constellation Software, which fell 1.6%.

In materials, gains were led by First Quantum (up 3%) and Ivanhoe Mines (up 3.7%). Precious metals companies saw mixed performance, with Wheaton Precious Metals up 1.5% and Agnico Eagle down 0.7%.

This recovery followed a previous session where the index dropped about 2.2% to 33,785 points amid a global flight to safe-haven assets due to rising Middle East tensions. At that time, bank stocks were hit by higher bond yields, while mining shares slumped due to gold price volatility.

On the economic front, S&P Global data showed ongoing pressure on the Canadian economy in February. The composite PMI registered 47.1 points, up from 46.4 in January, but remained below the 50-point threshold separating growth from contraction for the fourth consecutive month. The report indicated the decline was mainly driven by the services sector, despite a slight improvement in manufacturing.

The services PMI rose to 46.5 in February from 45.8 in January, signaling a slower pace of contraction but still below growth levels. New orders fell for the fifteenth consecutive month, though at the slowest rate since October 2025. Weak demand continued to weigh on the labor market, with employment declining for the sixth straight month due to companies reducing headcount or not replacing departures. Nonetheless, business confidence reached its highest level since October 2025, supported by expectations of improved demand, especially with upcoming international sporting events in Canada.

Productivity data showed labor productivity in the Canadian business sector fell 0.1% in Q4 2025 compared to the previous quarter, after a 1.1% rise in Q3. Business sector hours worked decreased by 0.1% following a 0.2% drop in Q3, while wages rose 0.5%, leading to a 0.7% increase in unit labor costs. Goods-producing sectors, especially manufacturing and construction, were key contributors to the productivity decline.

EcoPulse24 Analysis:

Recent data illustrate a Canadian economy on a divergent path: while equity markets show resilience led by technology and banking, PMI indicators point to continued weakness in domestic and external demand. This divergence complicates the outlook for Canadian monetary policymakers, who may be pushed toward more growth-supportive policies amid persistent global inflationary pressures tied to energy and geopolitics - factors that will likely shape market direction in the coming period.