U.S. and Canadian stocks advanced on Wednesday after investors parsed a steep downward revision in U.S. payrolls and the release of the minutes from the most recent meeting of the Federal Reserve, which cemented expectations for a September rate cut. While gains were modest, it was enough for a fresh record closing high for the S&P/TSX Composite Index.
The Canadian benchmark ended up 84.29 points, or 0.4%, at 23,121.73, eclipsing the record closing high it set on Monday.
“We are in a rising-tide market,” said Barry Schwartz, chief investment officer at Baskin Wealth Management. “There are some good vibes out there from the fact that interest rates are going to be cut globally and the economy is still so far so good.”
The Fed released minutes from its July monetary policy meeting, at which members of the Federal Open Market Committee elected to keep the key interest rate unchanged.
The July meeting occurred before the disappointing employment report for that month and a host of economic reports pointing to cooling inflation and a softening but resilient economy.
Even so, the minutes suggest Fed officials were already strongly leaning toward a rate cut at the meeting scheduled for September.
They also set the stage for the Jackson Hole Economic Symposium to convene on Thursday, where Fed Chair Jerome Powell will speak on Friday.
In economic news, the Labor Department released its preliminary benchmark revision to payrolls data for the 12 months through March 2024.
The revision lowered the 2.9 million payroll adds originally reported by 818,000. It was the steepest preliminary downward revision since the global financial crisis, and suggested that the apparent softening in the labour market could be more pronounced than previously assumed.
“Prior to today’s labour market data, the enthusiasm around Powell’s speech (on Friday) was probably fairly muted,” said Oliver Pursche, senior vice president at Wealthspire Advisors in New York. “That changed today.”
“This revision, which was a big number, is putting Chairman Powell in a position where he’s going to have to talk about the outlook for the labour market,” Pursche added.
Eight of 10 major sectors on the TSX notched gains, led by technology, which advanced 1.2%. The materials group added 0.7% as copper prices climbed.
Canadian Pacific Kansas City Ltd and Canadian National Railway Co were set to lock out around 10,000 of their Canadian unionized workers on Thursday, starting an unprecedented simultaneous work stoppage that would grind almost all railway freight movement in the country to a halt.
Shares of both companies ended modestly higher.
“It’s going to affect their earnings in Q3, unfortunately, but I don’t think anybody expects it (the strike) would go very long,” Schwartz said.
Energy was one of the sectors that ended lower, dipping 0.1%, as the price of oil settled 1.7% lower at US$71.93 a barrel, extending its recent decline.
The Dow Jones Industrial Average rose 55.52 points, or 0.14%, to 40,890.49, the S&P 500 gained 23.73 points, or 0.42%, to 5,620.85 and the Nasdaq Composite added 102.05 points, or 0.57%, to 17,918.99.
Nine of the 11 major sectors of the S&P 500 closed in positive territory, with consumer discretionary shares enjoying the largest percentage gains.
Target raised its 2024 profit forecast and posted its first quarterly increase in same-store sales in over a year, sending the retailer’s stock surging 11.2%.
TJX Cos rose 6.1% after the discount retailer lifted its annual profit forecast.
Macy’s lowered its annual net sales forecast, sending shares of the department store chain sliding 12.9%.
U.S.-listed shares of Chinese e-commerce firm JD.com dropped 4.2% after Walmart, the company’s biggest shareholder, sold its stake in the firm.
Ford Motor announced it was shaking up its electric vehicle plans. Its stock rose 1.6%.
In currency markets, the Canadian dollar rose to a four-month high against its U.S. counterpart as the prospect of Federal Reserve rate cuts helped underpin investor sentiment, despite the risk of a railway stoppage that could hurt the domestic economy.
The loonie was trading 0.2% higher at 1.3590 to the U.S. dollar, or 73.58 U.S. cents, after touching its strongest intraday level since April 10 at 1.3576.
The currency has benefited recently from “a shift in market confidence,” as investors anticipate the Fed will soon begin an easing cycle, said Darren Richardson, chief operating officer at Richardson International Currency Exchange.
Domestic data, showing that producer prices were unchanged in July from June and up 2.9% year-over-year, had little impact
Canadian government bond yields eased across the curve, with the 2-year down 2 basis points at 3.246%.
Reuters, Globe staff