Canada’s main stock index ended in the green on Wednesday, as investors betting on U.S. Federal Reserve’s rate cut next month were reassured after inflation south of the border slowed to below 3% for the first time in over three years.
The Toronto Stock Exchange’s S&P/TSX composite index rose 141.83 points, or 0.63%, at 22,760.01
A closely watched U.S. inflation data print showed consumer prices rebounded as expected in July, and the annual increase in inflation slowed to below 3% for the first time since early 2021, supporting the view inflation was being tamed.
“With inflation continuing to progress in the right direction, they (the Fed) will likely signal the start of a new easing cycle later this month at the Jackson Hole,” said Angelo Kourkafas, investment strategist at Edward Jones Investments.
Investors have grappled with worries about a slowdown in the world’s biggest economy, while looking ahead to the start of the Fed’s easing cycle. Lower U.S. interest rates typically lead to more demand for riskier assets such as equities.
“There have been some concerns that the US economy is slowing, the consumer is slowing, but... retail sales number (later this week) will help investors gauge the state of the economy,” Kourkafas said.
The S&P 500 closed higher. However, Alphabet and some megacap tech stocks traded lower, which weighed on the Nasdaq composite.
In Canada, energy, healthcare and financials were among sectoral gainers. The healthcare sector rose 1.8%, led by a 4.3% rise in Tilray Brand shares .
Meanwhile, the energy sector gained 0.9% as crude prices edged higher despite easing supply concerns over rising conflict in the Middle East.
The broader materials sector led sectoral losses, falling 0.7%, as gold prices dipped after investors trimmed bets for larger Fed rate cuts.
Among individual stocks, CAE Inc rose 5%, after the company’s first-quarter revenue beat estimates.
Franco-Nevada Corp lost 6.3%, after the company reported quarterly adjusted earnings below expectations.
The S&P 500 closed higher on Wednesday, stretching its winning streak to five sessions, as the latest inflation data reassured investors betting the Federal Reserve would start cutting U.S. interest rates next month.
However, Alphabet and some megacap tech stocks traded lower, which weighed on the Nasdaq composite, which finished close to unchanged.
Moves were generally subdued though, with many investors away for August vacations, and new triggers for trading were absent, contributing to an overall listless picture among the benchmarks.
The latest U.S. consumer price data, released earlier on Wednesday, offered little for anyone seeking divergence from the expected path to a September start to interest rate cuts.
U.S. consumer prices rose moderately in July, and the annual increase in inflation slowed to below 3% for the first time since early 2021.
Coming the day after softer-than-expected producer prices data indicated inflation continued to moderate, although not yet all the way to the U.S. central bank’s 2% target, supported the view inflation was being tamed.
Money markets now see a 55% chance of a 25-basis point (bps) rate cut at the Fed’s Sept. 17-18 meeting, as per the CME FedWatch Tool. Before the data, traders were nearly evenly split between a 25-bps and 50-bps cut.
Scott Ladner, chief investment officer at Horizon Investments, said he called days such as this “markets violently going nowhere,” adding with CPI painting a similar picture to PPI data, there was no reason for traders to reassess moves put in place on the previous day.
“There’s no huge rationale to move prices one way or another,” he said.
Unofficially, the S&P 500 closed at 5,455.21, up 0.38% or 20.78 points. The Nasdaq composite closed at 17,192.60, up 0.03% or 4.99 points. The Dow Jones Industrial Average closed up 242.75 points or 0.61% at 40,008.39.
Shares of Alphabet, the Google-parent, dropped on a media report that the U.S. Department of Justice is considering options that include breaking up the online search engine.
Other megacaps were mixed: Tesla and Meta Platforms dropped, while Microsoft and Nvidia rose.
A rebound in megacap and tech stocks has helped markets recoup most losses from a global market rout early this month after data showed the U.S. unemployment rate surged in July.
Thursday’s release by the Commerce Department’s Census Bureau of retail sales data will be keenly watched by those concerned about the overall strength of the American economy, Horizon’s Ladner said.
These worries had sent the Cboe volatility index, Wall Street’s fear gauge, to its highest since 2020 just last week. However, on Wednesday, it stayed below its long term average of 20 points for the second day.
A majority of the major S&P sectors were in positive territory, led by a rise in financials. Its advance was aided by gains by Progressive and Charles Schwab , which rose after positive July performance numbers, and Allstate, which climbed after agreeing to sell a business unit.
Kellanova surged after family-owned candy giant Mars said it would buy the Cheez-It and Pringles maker in a nearly $36 billion deal.
Cardinal Health gained after the drug distributor raised its 2025 profit forecast.
Reuters