Market recap: Week ended July 10, 2026

Markets navigated renewed Middle East tensions

The week opened with U.S. President Trump ringing the opening bells for the New York Stock Exchange and Nasdaq from the Oval Office. When trading began, markets were focused on AI-related stocks, with investors anticipating another round of strong results when the second-quarter earnings season kicks off. The Dow added 0.29%, the S&P 500 gained 0.72% and the tech-heavy Nasdaq rose 1.12%. Canada's TSX slipped 0.18% as declines in the materials and energy sectors offset gains elsewhere.

Sentiment shifted on Tuesday as concerns about the sustainability of the AI-driven rally pushed U.S. technology stocks lower. The Nasdaq surrendered Monday’s gains, dropping 1.16%. The Dow lost 0.25% and the S&P 500 fell 0.45%. The TSX edged 0.2% higher, led by a 3% increase in the energy sector as oil prices climbed 2.8%.

Oil prices surged another 5% on Wednesday after Trump said a temporary agreement with Iran was “over” and suggested new U.S. military strikes were possible. Although Trump later ruled out a return to full-scale war with Iran, the developments were enough to rattle markets. Canada’s TSX fell 0.95%, the S&P 500 declined 0.28% and the Dow dropped 1.09%. The Nasdaq was the lone major index to finish higher, gaining 0.20%.

Despite reports of new U.S. airstrikes against Iran and retaliatory actions targeting U.S. allies in the region on Thursday, markets regained some ground as investors focused on easing oil prices. The Dow advanced 0.3%, the S&P 500 rose 0.8% and the Nasdaq gained 1.3%. Canada's TSX climbed 0.76%, supported by a 1% gain in the financials sector and a 0.5% increase in technology shares.

The S&P 500 gained 0.42% on Friday, finishing just shy of a record high, while the Nasdaq and the Dow each advanced 0.29%. Gains were driven by ongoing strength in the tech sector and optimism for second-quarter earnings reports. In Canada, the TSX rose 0.3% to its highest level in three weeks, supported by stronger-than-expected employment data.

Economic data painted a mixed picture

In Canada, merchandise trade data provided a bright spot. Statistics Canada reported that the country's trade surplus widened to $4.2 billion in May, the largest surplus in four years, as exports climbed 0.9% to a record $77.1 billion. Exports to the U.S. rose 1.5%, helping lift Canada's trade surplus with its largest trading partner to $11.6 billion. On Friday, Statistics Canada also reported that the economy added 18,000 jobs in June, surpassing expectations for 10,000 new positions. The unemployment rate edged down to 6.5% from 6.6%, with gains concentrated in part-time work and the accommodation and food services and wholesale and retail trade sectors.

Other reports suggested parts of the Canadian economy remain under pressure. S&P Global's Canada Services Purchasing Managers Index (PMI) fell to 47.1 in June from 50.6 in May, marking its weakest reading since February. The decline suggests activity in the services sector, which includes industries such as retail, transportation and professional services, slowed during the month as elevated prices and geopolitical uncertainty weighed on demand.

In the U.S., the Institute for Supply Management's non-manufacturing PMI registered 54.0 in June, down slightly from 54.5 in May, but remained comfortably above the 50-point threshold that separates expansion from contraction, signalling continued growth in the services sector.

Inflation concerns remained in focus

Minutes from the U.S. Federal Reserve's June meeting released Wednesday, showed policy-makers were divided on the outlook for interest rates. While policy-makers voted to hold rates steady, a "few participants" argued there was already a case for additional tightening, while nearly all agreed higher rates could be warranted if inflation fails to move back toward the central bank's 2% target. Officials noted that price pressures have become more broad-based, extending beyond energy into areas such as transportation, air fares and agricultural inputs.

The International Monetary Fund (IMF) echoed those concerns in its latest global outlook (also released Wednesday), lowering its 2026 growth forecast to 3.0% from 3.1% in April, and raising its inflation forecast to 4.7%.

While the IMF said the global economy has proven resilient despite the ongoing conflict in the Middle East, it warned that elevated energy prices, trade fragmentation and the potential for a correction in AI-related investments continue to pose risks.

According to the IMF, energy prices are now roughly 25% higher than they were before the U.S.-Iran conflict began in February. Canada's outlook was also revised lower. The IMF now expects the Canadian economy to grow 1.1% in 2026, down from its previous forecast of 1.5%, before rebounding to 1.7% in 2027.