Wall Street rallied on Friday to end a volatile week, as U.S. Treasury yields eased and economic data helped investors look past the growing likelihood that the Federal Reserve will keep its restrictive policy in place for longer than anticipated. Canada’s TSX followed along, in a broad advance led by the tech and energy sectors, with encouraging economic data from major energy importer China helping to lend support.
The tech-laden Nasdaq was the strongest gainer among U.S. indexes, climbing nearly 2% and getting a boost from interest rate sensitive megacaps. U.S. Treasury yields eased in the wake of comments from Fed officials that calmed fears over inflation and interest rates.
“It continues to be all about the Fed and how gracefully they can slow the economy,” said David Carter, managing director at JPMorgan Private Bank in New York. “The Fed is telling markets what they want to hear but also injecting the caution that rates may need to go higher depending on the economic data.”
For the week, the indexes notched gains, with the S&P 500 snapping a three-week losing streak and the Dow, returning to positive territory year-to-date, enjoyed its first weekly advance since late January.
The week also saw the benchmark S&P 500 break through its 50- and 200-day moving averages, two closely watched technical levels.
“It’s an indication that a shift is transpiring,” said Robert Pavlik, senior portfolio manager at Dakota Wealth in Fairfield, Connecticut. “And a lot of people are suspect of it, but they don’t want to be left behind.”
U.S. economic data released on Friday showed steady demand for services, with purchasing managers’ indexes (PMI) from the Institute for Supply Management and S&P Global indicating that activity in the sector continues to expand even as input prices cool.
“Investors saw what they wanted in the ISM data, which was basically healthy growth with slowing prices,” Carter added. “It suggests they are willing to stay on the plane as they are less worried about the landing.”
The Toronto Stock Exchange’s S&P/TSX composite index ended up 244.37 points, or 1.2%, at 20,581.58, its highest closing level since Feb. 16. For the week, it was up 1.8%, after a three-week decline.
Activity in China’s services sector expanded at the fastest pace in six months in February as the removal of tough COVID-19 restrictions revived customer demand.
“China was closed for months and just improving economic data gives buyers of commodity stocks confidence that those prices can hold, and as we know it is a good chunk of the TSX index,” said Barry Schwartz, portfolio manager at Baskin Financial Services.
The Toronto market’s energy sector gained 1.7% as oil settled 1.9% higher at $79.68 a barrel, while the materials group, which includes precious and base metals miners and fertilizer companies, added 1.5%.
Combined, the energy and materials sectors account for about 30% of the TSX’s weighting.
All ten of the TSX’s major sectors gained ground, including a gain of 2.4% for technology, while financials were up 0.9%.
Among individual stocks, Suncor Energy Inc added 1.4% after Equinor said it would acquire the British oil and gas business of the energy firm for $850 million.
Sleep Country Canada Holdings Inc was up 5.9% after the company’s fourth-quarter sales and earnings beat estimates.
The Dow Jones Industrial Average rose 387.4 points, or 1.17%, to 33,390.97, the S&P 500 gained 64.29 points, or 1.61%, to 4,045.64 and the Nasdaq Composite added 226.02 points, or 1.97%, to 11,689.01.
All 11 major sectors of the S&P 500 ended the session green, with tech and consumer discretionary enjoying the largest percentage gains.
Fourth-quarter earnings season is on the final stretch, with all but seven of the companies in the S&P 500 having reported. Results for the quarter have beaten consensus estimates 68% of the time, according to Refinitiv.
Still, on aggregate, analysts believe S&P 500 earnings will have fallen 3.2% in the fourth quarter compared to the prior year, and expect negative year-on-year numbers for the first two quarters of 2023. This would imply the S&P 500 entered a three-quarter earnings recession in the closing months of 2022, per Refinitiv.
Apple Inc jumped 3.5% after Morgan Stanley said the stock could rally more than 20% this year on a potential hardware subscription.
Broadcom Inc advanced 5.7% after the chipmaker forecast second-quarter revenue above analysts’ estimates as increased investments in AI spurred demand for chips.
Among losers, Costco Wholesale Corp slipped 2.1% on the heels of its revenue miss, as high inflation dampened consumer demand.
Chipmaker Marvell Technology Inc slid 4.7% in the wake of the company’s quarterly profit miss and disappointing revenue forecast.
Advancing issues outnumbered declining ones on the NYSE by a 4.54-to-1 ratio; on Nasdaq, a 2.36-to-1 ratio favored advancers. The S&P 500 posted 23 new 52-week highs and 2 new lows; the Nasdaq Composite recorded 79 new highs and 57 new lows. Volume on U.S. exchanges was 10.83 billion shares, compared with the 11.10 billion average over the last 20 trading days.
Reuters, Globe staff
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