Canada’s main stock index rose Monday, helped by strength in the energy sector as the price of oil also climbed, while U.S. markets were mixed.
The week was off to a mixed start after last week’s rollercoaster, said John Zechner, chairman and lead equity manager at J. Zechner Associates.
Last week began with a frenzied selloff before markets almost entirely recovered throughout the course of the week, thanks to a Thursday rally that was Wall St.’s best day since 2022.
Canadian markets were outperforming their American counterparts Monday thanks to strength in the resource sector, said Zechner. He added that a pair of deals announced Monday — an acquisition by Tourmaline Oil and news that Osisko Mining is being sold — likely gave the sector a boost.
The S&P/TSX composite index closed up 87.63 points at 22,398.93.
The energy index on the TSX rose more than three per cent Monday as the price of oil jumped above US$80 per barrel.
Tech stocks got hammered last week, said Zechner, and have been leading the recovery as well.
As earnings season wraps up, investors’ focus will be on the U.S. Federal Reserve meeting this September, said Zechner. However, there will be lots to chew on in between, including the annual Jackson Hole Economic Symposium later this month.
Investors will be listening for commentary from Fed chair Jerome Powell on rate cuts, said Zechner.
“People wonder if he’s going to signal a bit more ease,” he said, noting that markets recently amped up bets for a 50-basis-point cut in September, instead of just 25.
This week will bring more economic data on retail sales and inflation in the U.S., as well as earnings from some major retailers, said Zechner.
“If all of those signal a continued slow down ... you are definitely going to build a bigger chance of a half-point rate cut in September,” he said.
As worries multiply that the U.S. economy might overshoot its soft landing, weaker economic data is increasingly being met with negativity in the equity market instead of with optimism tied to interest rate cuts, noted Zechner.
The Canadian dollar traded for 72.79 cents US compared with 72.82 cents US on Friday.
The September crude oil contract was up US$3.22 at US$80.06 per barrel and the September natural gas contract was up five cents at US$2.19 per mmBTU.
The December gold contract was up US$30.60 at US$2,504.00 an ounce and the September copper contract was up eight cents at US$4.07 a pound.
Wall Street stocks closed mixed on Monday as investors braced for a slew of U.S. economic data this week, especially consumer prices, to gauge the outlook for Federal Reserve monetary policy.
The Dow Jones Industrial Average fell. The benchmark S&P 500 index and tech-heavy Nasdaq Composite Index closed higher.
The Russell 2000 Index, focused on small companies, dropped 0.9%.
“The jumping to a rotation towards small cap companies, like the Russell 2000 and cyclicals in general and financials, was a very popular trade a few weeks ago and that’s really unwound itself,” said James Abate, chief investment officer at Centre Asset Management in New York.
“If you look at the trends in earnings and growth, we don’t have a broadening and expanding economy that will support a broadening out yet of growth and stock price appreciation.”
Investors are awaiting Wednesday’s U.S. consumer price index reading and retailer earnings to assess demand by shoppers.
The CPI data is expected to show headline inflation accelerated 0.2% in July from June, but unchanged at 3% on a year-on-year basis.
Money markets are evenly betting on a 25- or 50-basis-point cut in U.S. interest rates in September, expecting a total easing of 100 bps by the end 2024, CME’s FedWatch Tool showed.
Figures for July U.S. retail sales on Thursday are likely to show marginal growth, and investors expect that any weakness in the data could reignite fears of a consumer slowdown and a potential recession.
Walmart and Home Depot are due to report earnings later this week.
“Retail earnings are another indication on the health of the consumer particularly in light of the unemployment rate ticking up in the most recent report,” Abate said.
“One thing that could be a significant disappointment to the market is if the CPI number comes out higher than consensus.”
The S&P 500 gained 0.23 points to end at 5,344.39 points, while the Nasdaq Composite rose 35.31 points, or 0.21%, to 16,780.61. The Dow Jones Industrial Average fell 140.53 points, or 0.36%, to 39,357.01.
Starbucks rose 2.58% on reports that activist investor Starboard Value, which holds a stake in the coffee giant, wants the company to take steps to improve its stock price.
KeyCorp jumped 9.1% after Canada’s Scotiabank bought a minority stake in the U.S. regional lender in an all-stock deal worth $2.8 billion. Hawaiian Electric dropped 14.45% after the utility firm raised “going concern” doubts.
Declining issues outnumbered advancers by a 1.46-to-1 ratio on the NYSE. On the Nasdaq, declining issues outnumbered advancers by a 1.54-to-1 ratio.
The S&P 500 posted 10 new 52-week highs and seven new lows while the Nasdaq Composite recorded 51 new highs and 179 new lows.
Reuters and the Canadian Press