TSX Drops as Bond Yields Rise Amid Energy Price Slump

Canada's TSX Composite Index declined by 0.2% on Friday to close at 35,804.86, marking a small weekly gain despite the drop. The index was weighed down by energy shares, which fell 0.7%, and consumer staples, which dropped 1.2%. Bond yields continued their upward trend, pushing long-term borrowing costs higher and making stocks less attractive.

The rise in bond yields has negative implications for corporate profits, as future earnings are discounted at a higher rate. This dynamic was exacerbated by the decline in oil prices, with US crude futures settling 1.6% lower at $100.30 a barrel due to fresh headlines on Saudi supply and Middle East conflict fears.

The Bank of Canada's expected policy rate hike next month also had an impact, with markets pricing a 65% chance of a raise. This development benefited TSX banks, which saw their shares rise 0.2%, but put pressure on other sectors sensitive to higher yields.