Market Update: February 4, 2025 - TSX Climbs While S&P 500 Tests Support—Tech-Energy Divergence Creates Tactical Setup

While the TSX pushed past 25,320 (+0.2%) on rate cut hopes, the S&P 500 hovers near critical technical support at 5,985, creating a compelling divergence in North American markets. Here's how traders and investors can position for this pivotal juncture.

The Canadian market showed resilience today, with the S&P/TSX Composite Index advancing 0.2% to surpass 25,320, primarily driven by tech giant Shopify's impressive 3% surge and continued strength in gold mining stocks. This performance stands in stark contrast to the S&P 500's 0.75% decline, as the U.S. benchmark tests crucial support at its 20 and 50-day moving averages.

In the technology sector, we're seeing a fascinating split between artificial intelligence winners and traditional tech stocks. Nvidia's recent CES 2025 announcements have created waves, though the broader tech sector faces selling pressure. The energy sector remains cautious, trading flat-to-negative on the TSX amid ongoing trade policy uncertainties, while materials stocks, particularly gold-linked equities, continue to demonstrate relative strength.

For traders looking to capitalize on short-term opportunities, the S&P 500's gap resistance between 6017-6088 presents a key technical level to watch. A compelling tactical setup has emerged through pair trades, particularly going long TSX materials versus S&P 500 tech sector. This strategy aims to capitalize on the current market divergence while maintaining a balanced risk profile.

Long-term investors should maintain a balanced exposure with a focused approach on quality tech and materials stocks. Given the potential Bank of Canada rate decision on the horizon, increasing Canadian exposure could prove strategic, particularly in sectors showing relative strength.

Looking forward, several catalysts deserve close attention. The upcoming Bank of Canada and Federal Reserve rate decisions will likely drive market direction, while recent CES 2025 tech announcements continue to reverberate through the sector. Trade policy developments, particularly those affecting the energy sector, remain crucial for portfolio positioning.

On the risk front, investors should monitor potential tariff escalation impacts on cross-border trade and the concerning divergence between tech sector momentum and price action since mid-2024. This disconnect could signal broader market vulnerability.

Sources:

  • TSX Composite Index data and analysis via Trading Economics
  • Technical analysis and seasonal trends via EquityClock.com
  • Sector performance statistics provided by Standard & Poor's
  • Technology sector updates and market news via Investopedia Markets
  • Market sentiment indicators and momentum analysis via Wall Street Prep

Data and analysis based on market close February 4, 2025