Canada’s main stock index rose on Wednesday to a near two-year high, led by gains for the materials sector, as the Bank of Canada and the Federal Reserve continued to signal a move to lower interest rates ahead. Wall Street’s three major indexes also rose.
There was a lack of “hawkish” surprises from the BoC and the Fed, said Ian Chong, a portfolio manager at First Avenue Investment Counsel Inc.
“They seem to communicate a very consistent message that rates should come down later in the year should economic data continue to be supportive of that,” Chong said.
Federal Reserve Chair Jerome Powell told lawmakers that the Fed still expects to reduce interest rates later this year, while the Bank of Canada reiterated that the discussion at the central bank has shifted from whether the rates were restrictive enough to how long they needed to stay at their current level.
Powell said inflation had “eased substantially” since hitting 40-year highs in 2022, but that policymakers still needed “greater confidence” in its decline before rate cuts.
“He was clear that the Fed does see rate cuts coming this year. That’s what the markets needed to hear. Was it couched in some ambiguous terms? Yes, but overall the message was clear,” said Quincy Krosby, chief global strategist for LPL Financial. “It’s not if but when the Fed initiates a rate easing policy.”
Along with Powell’s testimony, Mark Luschini, chief investment strategist at Janney Montgomery Scott in Philadelphia, said Wednesday’s U.S. economic data also boosted hopes for rate cuts and confidence in the labour market.
Data showed U.S. private payrolls increased slightly less than expected in February. And the Job Openings and Labor Turnover Survey (JOLTS) showed job openings fell marginally in January, while hiring declined as labor market conditions continued to gradually ease.
“The number of job openings shriveled a bit, but are still quite healthy and indicative of a labor market that is still looking pretty stout,” said Luschini. “It fits the Goldilocks narrative that’s become consensus.”
February Canadian and U.S. jobs reports due on Friday will offer further clarity on the state of the labour market.
The Toronto Stock Exchange’s S&P/TSX composite index ended up 68.03 points, or 0.3%, at 21,593.96, its highest closing level since April 2022.
The materials group, which includes precious and base metals miners and fertilizer companies, rose 1.3% as gold added to its record-setting rally.
Energy was also up, rising 0.2%, as the price of oil settled 1.25% higher at US$79.13 a barrel.
Pipeline operator Enbridge Inc raised its short-term profit growth forecast and said it will spend $500 million expanding pipeline and storage assets to improve its U.S. Gulf Coast presence. The company’s shares rose 0.2%.
The consumer-related sectors also posted gains in Toronto, with consumer staples rising 0.6% and consumer discretionary up 0.9%.
On Wall Street, the Dow Jones Industrial Average rose 75.86 points, or 0.20%, to 38,661.05. The S&P 500 gained 26.11 points, or 0.51%, at 5,104.76 and the Nasdaq Composite added 91.96 points, or 0.58%, at 16,031.54.
The major U.S. indexes had lost more than 1% on Tuesday with weakness in megacap stocks and as investors anxiously awaited Powell’s comments.
Nine of the 11 major S&P 500 industry sectors finished in the green on Wednesday, led by rate-sensitive utilities , up almost 1%, and information technology, which rose 0.9%. Consumer discretionary was the biggest loser, down 0.4%.
Chip companies outperformed the broader market after underperforming on Tuesday, with the Philadelphia semiconductor index rallying 2.4% to a record closing high for the fourth time in five sessions.
Putting pressure on the consumer index, Tesla fell 2.3%, losing ground for its third straight day.
A closely watched Morgan Stanley analyst lowered his price target on the stock, saying that electric-vehicle demand was continuing to weaken in key markets including China despite hefty price cuts. Also a Baird analyst said Telsa’s first-quarter earnings were at risk, suggesting delivery estimates still need to go lower.
U.S.-listed shares of China’s JD.com advanced 16.2% after the e-commerce group reported fourth-quarter revenue above estimates and enlarged its share repurchase program.
Shares of cryptocurrency-linked companies advanced, including a 10% gain for Coinbase Global and MicroStrategy’s 18.6% increase.
CrowdStrike Holdings shares soared 10.8% after it forecast annual results above Wall Street estimates, lifted by strong enterprise spending on cybersecurity to counter rising online threats. However, rival Palo Alto fell 4%.
Advancing issues outnumbered decliners by a 2.82-to-1 ratio on the NYSE where there were 493 new highs and 59 new lows. On the Nasdaq 2,605 stocks rose and 1,687 fell as advancing issues outnumbered decliners by about a 1.54-to-1 ratio. The S&P 500 posted 53 new 52-week highs and five new lows while the Nasdaq recorded 229 new highs and 120 new lows. On U.S. exchanges 12.54 billion shares changed hands compared with the 12.06 billion average for the last 20 sessions.
Reuters, Globe staff