Canada’s main stock index rose on Monday to a 10-day high, led by gains for resource shares, as an expectation that the Federal Reserve could cut interest rates to support the U.S. economy if it fell into trouble bolstered investor sentiment.
The S&P/TSX composite index ended up 57.70 points, or 0.3%, at 21,067.30, its highest closing level since Feb. 2. In the U.S., the Nasdaq slipped after briefly surpassing its record closing high from November 2021, while the Dow rose modestly to a fresh record.
“The market sentiment is really good,” said Allan Small, senior investment adviser of Allan Small Financial Group with iA Private Wealth. “The Federal Reserve is there to backstop the economy should things get really bad. A win-win mentality is partially fuelling this upward trend.”
The U.S. consumer price (CPI) index report for January, due for release on Tuesday, could provide clues on the timing of expected interest rate cuts by the Fed. This week the market also gets U.S. data on industrial production, retail sales and preliminary University of Michigan consumer sentiment.
“If the CPI shows inflation is not moving higher and we’re still seeing GDP and jobs growth, it says inflation can come down and growth can still happen,” Small said.
The energy sector in Toronto rallied 1.2% as oil settled 8 cents higher at US$76.92 a barrel on continued Middle East tensions and after Enbridge Inc reported quarterly results. The pipeline operator’s shares ended with a gain of nearly 2%.
The materials group, which includes precious and base metals miners and fertilizer companies, was up 0.9%, while shares of luxury parka maker Canada Goose climbed 8.2%, helping to lift the consumer discretionary sector by 1.1%.
Fairfax Financial denied allegations by Muddy Waters Research that it was manipulating asset values, saying the short-seller’s report was “false and misleading.” The company’s shares gained 4.9%.
Technology gave back some recent gains on the TSX, falling 1.5%, and industrials were down 0.7%.
On Wall Street, the Nasdaq lost steam in the afternoon after rising early in the session past its highest closing level hit in November 2021, within a percentage point of its all-time intra-day high of 16,212.229.
“An inflation number that’s really hot might get some investors a bit nervous, but other than that the Fed is going to be in the same mode,” said Joe Saluzzi, co-manager of trading at Themis Trading.
Over the past four months, megacaps with greater exposure to artificial intelligence have spearheaded a bull market in the U.S. as other stocks also rose on hopes of imminent rate cuts and an upbeat outlook from businesses.
During the session, Nvidia crossed above Amazon.com in market capitalization, as the euphoria around AI catapulted the chipmaker to the fourth-most valuable U.S. company, but ended the day behind the online retailer. Nvidia ended the day up 0.16%, while Amazon dipped 1.2%.
With recent data reflecting a robust economy, central bankers have shown less eagerness for early rate cuts. The odds for at least a 25-basis-point rate reduction in May have dropped to 52.2%, from over 95% at the start of 2024, as per the CME FedWatch Tool.
The S&P 500 lost 4.12 points, or 0.08%, to end at 5,022.49 points, while the Nasdaq Composite lost 42.74 points, or 0.27%, to 15,947.92. The Dow Jones Industrial Average rose 135.76 points, or 0.35%, to 38,807.45.
The small caps Russell 2000 index climbed 1.9%.
“Investors are rotating into those areas that have not kept pace with the broader market because that’s possibly where there is greater value,” said Sam Stovall, chief investment strategist at CFRA Research. “Today could be sort of a bottom fishing day for the market.”
Among other movers, Diamondback Energy jumped 9.4%, helping energy to top the 11 S&P 500 sectors with gains. Diamondback announced a $26-billion deal to buy the largest privately held oil and gas producer in the Permian basin, Endeavor Energy Partners.
Joby Aviation gained 6.4% as the electric-powered aircraft maker signed an agreement to launch air taxi services in the United Arab Emirates by early 2026.
On the Nasdaq 2,835 issues advanced and 1,452 declined as a 1.95-to-1 ratio favored advancers. On the NYSE advancing issues outnumbered declining ones by a 3.4-to-1 ratio. There were 592 new highs and 46 new lows. The S&P 500 posted 53 new 52-week highs and no new lows while the Nasdaq recorded 344 new highs and 53 new lows. On U.S. exchanges 11.14 billion shares changed hands compared with the 11.72 billion moving average for the last 20 sessions.
Reuters, Globe staff