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U.S. stocks ended sharply up on Thursday, with the S&P 500 approaching record highs as AI optimism drove gains in Nvidia and other chipmakers. Stocks were also higher in Canada, but gains were held in check by uncertain prospects for the expected start of central bank interest rate cuts.

U.S.-listed shares of Taiwan Semiconductor Manufacturing (TSMC) soared nearly 10% after the world’s largest contract semiconductor maker projected 2024 revenue growth of more than 20% on booming demand for high-end chips used in artificial-intelligence applications.

Heavyweight chipmaker Nvidia rose 1.9% to a record high, and it was the most-traded company on Wall Street, with almost US$28 billion worth of shares exchanged. Rival Advanced Micro Devices rose 1.6% and also notched a record high.

Broadcom, Qualcomm and Marvell Technology gained more than 3% each. The Philadelphia SE semiconductor index rallied 3.4% and approached its December 2023 record high.

“AI has caused this industry to have a ‘rip your face off’ rally, and I don’t think it’s stopping anytime soon,” said Jake Dollarhide, CEO of Longbow Asset Management.

Apple jumped 3.3% after BofA Global Research upgraded the iPhone maker’s stock to “buy” from “neutral.” That helped the S&P 500 information technology index rise 2% and hit a record high.

The S&P 500 climbed 0.88% to end the session at 4,780.94 points. The benchmark is off just 0.3% from its record-high close in January 2022.

The Toronto Stock Exchange’s S&P/TSX composite index ended up 61.71 points, or 0.3%, at 20,756.73, clawing back some of the previous day’s sharp decline.

“Everybody is waiting for the first hint of a rate cut and now I think the market has to grapple with this notion that it may not come as quickly as they were hoping,” said Allan Small, senior investment advisor of the Allan Small Financial Group with iA Private Wealth.

The number of Americans filing new claims for unemployment benefits fell last week to the lowest level in nearly 1-1/2 years. The data added to strong retail sales growth in December in painting an upbeat picture of the economy, and could make it difficult for the Federal Reserve to start cutting interest rates in March as financial markets anticipate. Bond yields Thursday rose modestly across the curve in both Canada and the U.S.

Traders now see a 56% chance for a 25-basis-point rate cut in March at the Fed, compared with odds above 80% a month ago, according to the CME Group’s FedWatch Tool.

The chances of an interest rate cut by the Bank of Canada in the first half of this year have been on the decline as well, according to overnight swaps markets, which now see only about 60% odds the first cut will occur in April. Earlier this week, Canada released data showing unexpectedly stubborn core inflation.

Canadian retail sales data for November, due on Friday, could offer clues on the Bank of Canada’s policy outlook ahead of the central bank’s policy decision next week. Economists expect sales to decline 0.1% after rising 0.6% in October.

TSX industrials rose 1.5% and consumer staples ended 1.9% higher. Heavily-weighted financials also gained ground, adding 0.4%.

Energy was a drag, falling 0.5%, even as the price of oil settled 2.1% higher at US$74.08 a barrel.

Birchcliff Energy Ltd shares fell 9.1% after the oil and gas producer revised its five-year outlook to reflect slower production and slashed its dividend.

The Nasdaq gained 1.35% to 15,055.65 points, while the Dow Jones Industrial Average rose 0.54% to 37,468.61 points.

Interest rate-sensitive sectors dipped, with the S&P 500 real estate index down 0.6% and utilities index losing 1.05%.

Atlanta Federal Reserve President Raphael Bostic said he was open to reducing rates sooner than he had anticipated if there is “convincing” evidence in coming months that inflation is falling faster than he expected. Bostic had previously said he expected it would be appropriate to cut rates in the second half of 2024.

Humana dropped 8% after the health insurer forecast fourth-quarter medical costs to be higher than previously expected. Peer UnitedHealth fell 1.6%.

KeyCorp dropped 4.6% after the lender posted a decline in fourth-quarter profit, while Birkenstock sank about 8% after missing quarterly profit expectations.

Spirit Airlines ended down more than 7% after news it is looking at options to refinance its debt and is not considering restructuring.

Advancing issues outnumbered falling ones within the S&P 500 by a two-to-one ratio. The S&P 500 posted 30 new highs and seven new lows; the Nasdaq recorded 56 new highs and 180 new lows. Volume on U.S. exchanges was relatively heavy, with 11.8 billion shares traded, compared with an average of 11.5 billion shares over the previous 20 sessions.

Reuters, Globe staff

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