Global shares hit record highs Wednesday after data showed U.S. consumer price increases slowed in July, easing concerns that the Federal Reserve will imminently signal a scaling back of bond purchases.
Canada’s main stock index held near record-high levels on Wednesday, as higher gold prices helped the heavyweight mining sector.
The Toronto Stock Exchange’s S&P/TSX composite index was unofficially up 58.27 points, or 0.28%, at 20,554.01.
The materials sector, which includes precious and base metals miners and fertilizer companies, added 1.3%. It was the top boost to the benchmark index as gold prices jumped 1% after slowing U.S. inflation growth saw markets scaling back their expectations for early tapering by the Federal Reserve.
The energy sector erased early losses and finished 0.2% higher as oil prices sank after the United States urged the OPEC+ to increase supply.
The financials sector gained 0.6%. The industrials sector rose 0.8%.
The Dow Jones Industrial Average and S&P 500 closed at record levels on Wednesday, as data indicated U.S. inflation growth may have peaked, while sectors tied to economic growth advanced on the heels of the passage of a large infrastructure bill.
The Labor Department said the consumer price index increased 0.5% last month after climbing 0.9% in June, the largest drop in month-to-month inflation in 15 months, easing concerns about the potential for runaway inflation.
“As far as the equity market’s concerned, it’s a positive number,” said Steven Ricchiuto, U.S. chief economist at Mizuho Securities USA LLC in New York.
“This number is going to put the Fed in a little bit of a quandary because they’ve gone out with all this rhetoric about tapering, about tightening rates, about being defensive and the inflation numbers aren’t quite where they should be, but they’re certainly not showing that this thing is out of control.”
Investors have been closely attuned to inflation pressures in recent months, concerned that a continual rise in prices could push the Federal Reserve to begin to scale down its ultra-accommodative policy stance earlier than anticipated.
Kansas City Federal Reserve President Esther George said on Wednesday that with the U.S. economy growing at a robust pace, it signals the “time has come to dial back the settings.” In addition, Dallas Federal Reserve President Robert Kaplan said the central bank should announce its timeline to reduce its massive bondholding next month, with tapering to begin in October.
Unofficially, the Dow Jones Industrial Average rose 221.22 points, or 0.63%, to 35,485.89, the S&P 500 gained 11.11 points, or 0.25%, to 4,447.86 and the Nasdaq Composite dropped 23.91 points, or 0.16%, to 14,764.18.
After the U.S. Senate passed a $1 trillion bipartisan infrastructure package on Tuesday, an additional $3.5 trillion budget plan full of new domestic programs was also approved by the legislative body but disagreements within the Democratic party threatened the size and scope of the spending.
Shares of equipment maker Caterpillar Inc advanced and was the biggest boost to the Dow and peer Deere & Co gained. Also moving higher were construction materials supplier Vulcan Materials Co and steelmaker Nucor Corp, building on gains in the prior session on expectations of benefiting from infrastructure projects.
The materials and industrials were the best performing of the 11 major S&P sectors.
Technology stocks moved off earlier lows in the wake of a strong 10-year note auction, which sent yields lower after a five day streak of gains session amid optimism about a stronger economic reopening.
NortonLifeLock Inc jumped after the cybersecurity company agreed to buy London-listed rival Avast for up to $8.6 billion.
Coinbase Global Inc climbed after the cryptocurrency exchange beat market estimates for second-quarter profit, helped by a near 38% jump in trading volumes on a sequential basis.
Virgin Galactic plunged after Morgan Stanley downgraded the stock to “underweight” from “equal-weight,” pointing to a prolonged period of no flights.
European shares also hit record highs, clocking their longest winning streak in two months. The STOXX 600 index rose 0.4% to hit an all-time high for an eighth consecutive session.
Oil gained Wednesday, changing course after the Biden administration said it would not call on U.S. producers to increase crude output, and that efforts to increase OPEC production were a longer-range plan.
U.S. crude oil futures settled at $69.25 per barrel, up 96 cents or 1.41%. Brent crude futures settled at $71.44 per barrel, up 81 cents or 1.15%.
U.S. Treasury yields fell in choppy trading, following a strong 10-year note auction. 10-year yields dropped to session lows, falling from four-week peaks earlier in the session.
Benchmark 10-year notes rose 4/32 in price to yield 1.3303%, down from 1.342% late on Tuesday.
Gold prices jumped following the inflation data.
U.S. gold futures settled up 1.2% at $1,753.30.
Spot gold added 1.4% to $1,752.72 an ounce. U.S. gold futures gained 1.23% to $1,750.40 an ounce.
The dollar index fell 0.189%, with the euro up 0.19% to $1.174.
Asian shares had slipped as fears about further waves of the coronavirus dampened a positive lead from Tuesday’s record close on Wall Street.
MSCI’s broadest index of Asia-Pacific shares outside Japan lost 0.3%.
The Delta variant of the new coronavirus is spreading quickly in many Asian countries, raising fears about local restrictions on travel and other activity damaging the economic recovery.
Reuters
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