Canada’s main stock index rose by the most in seven weeks on Monday, clawing back some recent declines, as investors rotated their holdings out of technology and into resource and interest rate sensitive shares.
The S&P/TSX composite index ended up 293.73 points, or 1.4%, at 21,848.59, its biggest gain since May 6. On Friday, the index posted its fifth straight weekly decline.
“It’s been overdue for a rebound,” said Elvis Picardo, a portfolio manager at Luft Financial, iA Private Wealth. “There’s possibly some profit taking in the big caps ... I think there’s some sector rotation going on too because some of the valuations in the other sectors look really attractive. When that kind of sector rotation tends to happen it generally benefits the TSX.”
The TSX’s forward price earnings ratio, a key valuation metric, at 14.3, is much less than the 22.4 level for U.S. benchmark the S&P 500, data from LSEG shows.
The energy sector rallied 3.4% as the price of oil settled 1.1% higher at US$81.63 a barrel.
Gold and copper prices also climbed. That helped lift the materials group, with the sector adding 1.1%.
Heavily weighted financials added 1.7%, while the utilities group, which includes many high-dividend paying shares that could particularly benefit from further interest rate cuts by the Bank of Canada, was up 2.4% and real estate added 2.1%.
Technology lost ground in Toronto, falling 0.6%.
On Wall Street, the Dow rallied to a one-month high, while the Nasdaq tumbled over 1% as investors rotated out of AI-linked stocks and also added some laggards to their portfolios, betting on Federal Reserve interest rate cuts this year.
The S&P 500 and Nasdaq ended lower on the rotation out of technology stocks whose outsized gains have led this year’s rally. Still, nine of the S&P 500′s 11 major industry sectors gained ground.
Nvidia slid 6.68% for a third session, as market watchers cited profit taking in the semiconductor bellwether after last week’s meteoric rise made it the world’s most valuable company.
Other chip stocks including U.S. shares of Taiwan Semiconductor Manufacturing, Broadcom, Marvell Technology and Qualcomm dropped between 3.53% and 5.7%, dragging the chip stocks index down 3.02%.
Technology and the consumer discretionary were the only two decliners among the 11 S&P 500 sector indexes, while the energy sector was the top outperformer, advancing 2.73%.
The Dow Jones Industrial Average registered a five-day winning streak. The small-caps index Russell 2000 also hit its highest in over a week, signaling broader market gains.
Except for Nvidia and other chip stocks, “the rest of the market is behaving positively on the expectation that we’re still on course for a soft landing base case,” said Carl Ludwigson ,managing director at Bel Air Investment Advisors.
The biggest event on stock investors’ radar for the week is Friday’s personal consumption expenditures (PCE) price index report, the Fed’s preferred measure of inflation, expected to show a moderation in price pressures.
Investors still expect about two rate cuts this year, pricing in a 61% chance of a 25-basis-point cut in September, as per LSEG’s FedWatch. The Fed’s own latest projection is for one rate cut likely in December.
Other U.S. data this week include durable goods, weekly jobless claims and final first-quarter GDP figures, the annual Russell index reconstitution. Some quarterly earnings reports also are due.
Canada releases its latest consumer price index report on Tuesday. Money markets ahead of the report were pricing in 72% odds that the Bank of Canada will cut interest rates again in July.
San Francisco Fed President Mary Daly said she does not believe the U.S. central bank should cut rates before policymakers are confident inflation is headed toward 2%.
The S&P 500 lost 15.73 points, or 0.29%, to end at 5,448.89 points, while the Nasdaq Composite lost 190.19 points, or 1.09%, to 17,499.17. The Dow rose 257.99 points, or 0.66%, to 39,408.32.
Advancing issues outnumbered decliners by a 2.25-to-1 ratio on the NYSE. There were 179 new highs and 48 new lows on the NYSE. The S&P 500 posted 35 new 52-week highs and one new low while the Nasdaq Composite recorded 49 new highs and 128 new lows. Volume on U.S. exchanges was 10.94 billion shares, compared with the 11.92 billion average for the full session over the last 20 trading days.
Reuters, Globe staff