TSX Closer: The Index Crashes For the Second Time In a Week

04:26 PM EST, 02/05/2026 (MT Newswires) -- The Toronto Stock Exchange closed sharply lower on Thursday for the second time in a week, with the resources-heavy exchange weighed down by deflated commodity prices and fresh economic updates, as data showed signs of a slowdown in the U.S. labor market and as Desjardins noted the Bank of Canada Governor has thrown "more cold water on the possibility of rate cuts".

The S&P/TSX Composite Index closed down 576.94 points, or 1.75%, to 31,994.60. This comes after the index lost nearly 1,100 points, or 3.3%, last Friday, and even though it had recovered more than half of those particular losses leading in to today, the TSX now stands well down from a 10th record close of 2026 at 33,176.07 set Jan. 28.

Of commodities, gold traded lower late afternoon Thursday after the metal failed to find support at the US$5,000 mark a day earlier, even as treasury yields weaken amid further signs the U.S. labor market is slowing. Gold for March delivery was down US$118.40 to US$4,832.40 per ounce. Silver also continued to retreat, dropping US$11.38 to US$73.02 per ounce, down 37% from its Jan. 26 record high of US$115.50.

Also, West Texas Intermediate crude oil closed lower on easing geopolitical tensions after Iran agreed to hold talks with the United States in Oman on Friday over its nuclear program, easing fears of a U.S. military strike on the OPEC+ member. WTI crude oil for March delivery closed down US$1.85 to settle at US$63.28 per barrel, while April Brent oil was down US$1.79 to US$67.67.

Royce Mendes, Head of Macro Strategy at Desjardins, noted Bank of Canada Governor Tiff Macklem, today reiterated that in his view monetary policy is only part of the solution for what ails the Canadian economy. In prepared remarks delivered to an audience in Toronto, Macklem "essentially said his hands were tied" in addressing the economic weakness he believes has been caused by the structural change underway.

"Specifically," Mendes said, "he stated that monetary policy can't restore the lost efficiency from trade frictions with the US. Since the current soft patch in the labour market is narrowly isolated in trade-exposed sectors, he believes the evidence suggests that the current slowdown is structural in nature. In his view, cutting interest rates further would only stoke excess inflation, as aggregate demand would bump up against the reduced productive capacity of the economy." Mendes cited Macklem as saying, "monetary policy should not try to mitigate structural change."

According to Mendes, this narrative is in sharp contrast to the view of Kevin Warsh. Mendes noted the freshly nominated Fed Chair believes that monetary policy can help accelerate the structural transition underway, with lower interest rates supporting business spending on productivity enhancing investments. "Only time will tell which central banker is correct," Mendes said. "However," he added, "with inflationary pressures already very tame in Canada, Macklem sounded unnecessarily hawkish on the outlook for rates." In the view of Desjardins, the latest data point to a growing risk that Canadian central bankers were wrong in declaring that interest rates had hit their trough last year. Since the remarks were published, markets have moved to price in slightly higher Government of Canada bond yields, even as US Treasury yields have fallen further, Mendes noted.

Another indicator of a slowing U.S. labor market also unsettled investors, after the U.S. Bureau of Labor Statistics December Job Openings and Labor Turnover Survey (JOLTS) showed U.S. job openings fell to 6.5 million in the month, down from a revised 6.93 million a month earlier, and well under the consensus estimate for 7.1-million listings, according to Marketwatch.

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