TSX Ends Lower but Notches Third Straight Weekly Gain Amid Mixed Signals

The Toronto Stock Exchange (TSX) closed at 23,193 on April 4, 2025—a 6.3% decline for the week—but still managed its third consecutive weekly gain, reflecting a market caught between optimism and uncertainty. While sectors like aerospace and technology provided tailwinds, lingering trade tensions and macroeconomic headwinds kept investors on edge.

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The TSX’s Resilience: A Closer Look

The index’s ability to post three straight weekly gains, despite the recent dip, hinges on sector-specific strengths and broader policy shifts. The inclusion of MDA Space (TSX: MDA) in the TSX Composite Index has been a pivotal driver. The space technology firm’s stock surged 151% over 12 months, fueled by a $1 billion contract for NASA’s Artemis program. By Q3 2024, MDA’s backlog had swelled to $4.6 billion, ensuring long-term revenue visibility.

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Headwinds from the Lumber Sector

The TSX’s gains were tempered by challenges in the lumber and wood products sector, where U.S. tariffs cast a shadow. West Fraser Timber Co. (TSX: WFG), a key TSX constituent, saw its Q1 2025 shipments and earnings pressured by 25% tariffs on Canadian wood exports, later reduced to 10% but still disruptive. The tariffs forced West Fraser to slash shipment targets for lumber and OSB, while its Europe EWP segment reported a $2 million loss due to macroeconomic headwinds.

Macroeconomic Crosscurrents

The TSX’s mixed performance also reflects broader economic forces:
- Interest Rates: The Federal Reserve’s 100 basis point cuts since September 2024 eased borrowing costs, supporting housing demand. U.S. housing starts hit 1.32 million in March 2025, but mortgage rate volatility and tariffs kept growth fragile.
- Trade Policy Risks: The U.S. Section 232 investigation into timber imports introduced uncertainty, with potential for higher tariffs. Canada’s economy, reliant on U.S. trade (67% of exports), faces amplified exposure to these disputes.

A Look Ahead: Risks and Opportunities

The TSX’s trajectory remains tied to trade policy outcomes and sector resilience:
- Positive Leverage: MDA’s backlog growth and the Fed’s accommodative stance could continue to buoy the index.
- Near-Term Risks: If U.S. tariffs escalate or housing demand weakens further, lumber and energy stocks—already down sharply—could drag the TSX lower.

Conclusion

The TSX’s recent performance highlights its dual nature: a market lifted by tech-driven growth but vulnerable to trade and policy headwinds. While the index’s third straight weekly gain to April 4—up 0.77% year-to-date—reflects resilience, the 6.3% weekly drop underscores underlying fragility. Investors must weigh the $4.6 billion backlog at MDA against the $2 billion in lost revenue for wood exporters due to tariffs.

With Canada’s economy showing signs of softening (unemployment rose to 6.7% in March) and global supply chains strained, the TSX’s next move hinges on whether trade tensions ease or deepen. For now, the index remains 15.8% above its 52-week low but 3.45% below its January 2025 peak—a reminder that mixed signals will dominate until clarity emerges on policy and trade.

The path forward is uncertain, but the TSX’s ability to balance tech optimism with trade realism will define its next chapter.