Major North American indexes rose on Thursday after higher-than-expected U.S. producer prices data reinforced expectations for a 25-basis point rate cut by the Federal Reserve, with the Canadian benchmark stock index closing at a record high.
The producer price index for final demand rose 0.2% in August, compared with estimates for 0.1% growth. The core number, which strips out volatile food and energy prices, rose 0.3%, higher than the 0.2% forecast.
Separately, initial claims for state unemployment benefits stood at 230,000 for the week ended Sept. 7, in line with estimates.
“This week’s data pretty much confirms that we’re not likely to have a hard landing and that we’re in a soft landing,” said Peter Tuz, president of Chase Investment Counsel in Charlottesville, Virginia. “As long as investors see that interest rate cut and a path forward for interest rate cuts they’re excited about prospects in the stock market and especially the growthier sections.”
A string of weakening U.S. employment and economic growth data in the past few weeks had fueled some bets on a larger-than-usual 50-bps interest rate cut by the Fed, but these bets had faded after Wednesday’s inflation report.
While on Thursday the bets fluctuated, traders were still betting on a 69% chance the U.S. central bank cuts rates by just 25 bps when it meets on Sept. 17-18, CME’s FedWatch Tool showed. It would be the first rate cut since March 2020.
The S&P/TSX composite index ended up 263.97 points, or 1.1%, at 23,475.14, moving past the record closing high it posted on Aug. 26.
“The TSX is firing on all cylinders today,” said Elvis Picardo, a portfolio manager at Luft Financial, iA Private Wealth. “The materials group is leading the charge ... led by the precious metals miners. I think investors are finally waking up to this stealth rally in gold and silver.”
The price of gold rose 1.8%, increasing its gain since the beginning of the year to 24%, while the materials sector, which includes metal mining shares and fertilizer companies, jumped 4.1%.
All ten major sectors on the TSX ended higher, with industrials adding 1.1% and energy up 0.8%.
U.S. crude futures settled 2.5% higher at US$68.97 a barrel as producers assessed the impact on output in the U.S. Gulf of Mexico after Hurricane Francine tore through offshore oil-producing areas.
In stock news, Air Canada said that the federal Canadian government should be prepared to intervene to prevent a looming pilots’ strike that the carrier said could cause disruption for weeks to come. Shares of the airline rose 1.9%.
The Dow Jones Industrial Average rose 235.06 points, or 0.58%, to 41,096.77, the S&P 500 gained 41.63 points, or 0.75%, to 5,595.76 and the Nasdaq Composite gained 174.15 points, or 1.00%, to 17,569.68.
The more economically sensitive small-cap Russell 2000 outperformed with a 1.2% gain.
All of the S&P 500′s 11 industry sectors ended higher, led by communication services, which added 2%.
The sector’s biggest percentage gainer was Warner Bros Discovery, which advanced 10.4% after it announced with Charter Communications that the cable company would provide customers an ad-supported version of Warner’s streaming services Max and Discovery+. Charter shares rose 3.6%.
Moderna finished down 12.4% after hitting its lowest level since November. The vaccine maker had forecast sales of US$2.5 billion to US$3.5 billion next year, below analysts’ estimates.
In more bullish news, Kroger shares rallied 7.2% after the supermarket chain beat second-quarter estimates and raised the lower end of its annual sales forecast.
Advancing issues outnumbered decliners by a 3.45-to-1 ratio on the NYSE where there were 405 new highs and 46 new lows.
On the Nasdaq, 2,665 stocks rose and 1,543 fell as advancing issues outnumbered decliners by a 1.73-to-1 ratio. The S&P 500 posted 37 new 52-week highs and no new lows while the Nasdaq Composite recorded 73 new highs and 76 new lows.
On U.S. exchanges 10.58 billion shares changed hands compared with the 10.82 billion moving average for the last 20 sessions.
Reuters, Globe staff