The S&P 500 and the Dow advanced on Thursday as investors digested the U.S. Federal Reserve’s new strategy to adopt an average inflation target and restore the United States to full employment, as well as a promising development in the fight to contain the coronavirus pandemic.
Nasdaq closed narrowly lower, as did the Toronto Stock Exchange.
The S&P/TSX Composite Index closed down 58.48 points, or 0.35%, at 16,731.49. Materials took the brunt of the losses, dropping 2.13% on a decline in the price of bullion.
Financials rose 0.66% after another pair of earnings beats from Canadian banks, wrapping up a largely upbeat week of results from the big lenders. CIBC closed up 1.91%, and Toronto Dominion Bank 0.05%, after their latest numbers. TD gave greater weight to more pessimistic forecasts for a protracted recovery as the bank set aside more funds to cover possible losses on soured loans, its chief financial officer told The Globe and Mail. Royal Bank of Canada and National Bank both rose a further half a percentage point as analysts made rating upgrades and price target hikes following their earnings on Wednesday.
The largest percentage gainer in the TSX was Tricon Residential Inc, which jumped 10.10 % after Blackstone Real Estate Income Trust Inc agreed to invest $300 million in the rental housing company. BRP Inc rose 3.84% after the all-terrain vehicle maker reported a surprise second-quarter profit.
The Fed’s new strategy sent Treasury yields higher, which gave a lift to interest rate-sensitive financials in the U.S.
“The steepening of the yield curve is a welcome addition, particularly on a day where the market is rising,” said Matthew Keator, managing partner in the Keator Group, a wealth management firm in Lenox, Massachusetts.
The financial sector provided the biggest boost to the S&P 500 and the Dow, pushing the former to its fifth straight record closing high and the latter within a hair’s breadth of reclaiming positive territory for the year so far.
The Dow remains more than 3.6% below its record high reached in February.
Stocks lost steam late in the session following House of Representatives Speaker Nancy Pelosi issued a statement saying Democrats and Republicans remain far apart over the next stimulus bill.
Declines in market-leading momentum stocks capped gains in the S&P and Dow and held the Nasdaq in the red.
“There seems to be a bit of rotation with regards to the news today and how the market has responded, giving the markets a value bump,” Keator added.
Shares of Abbott Laboratories jumped 7.8% after the company won U.S. approval to market a cheap, portable, rapid COVID-19 antigen test, which could be a step toward containing the pandemic that sent the U.S. economy spiraling into recession.
Economic recovery was forefront in Fed Chairman Jerome Powell’s remarks made as part of the Kansas City Fed’s virtual Jackson Hole symposium. In the speech Powell outlined the central bank’s aggressive new strategy to support the economy by lifting inflation and returning the economy to full employment.
“The statement by Powell in some regards is telegraphing a continued dovish stance for quite some time,” Keator said.
But with last week’s initial jobless claims stubbornly hovering above the 1 million mark, according to the Labor Department, a return to full employment currently appears to be a long haul.
The Dow Jones Industrial Average rose 160.35 points, or 0.57%, to 28,492.27, the S&P 500 gained 5.82 points, or 0.17%, to 3,484.55 and the Nasdaq Composite dropped 39.72 points, or 0.34%, to 11,625.34.
Of the 11 major sectors in the S&P 500, financials enjoyed the biggest percentage gain while communications services , weighed down by Netflix Inc and Facebook Inc , lagged.
Shares of Walmart Inc and Microsoft Corp rose 4.5% and 2.5%, respectively after announcing a joint bid for TikTok’s U.S. assets.
Boeing Co rose 1.3% after the European Union Aviation Safety Agency announced plans to begin flight tests of its grounded 737 MAX plane.
Cosmetics maker Coty Inc plunged 8.1% after retail closures and weak demand led to a bigger-than-expected quarterly loss.
Reuters, Globe staff
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