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Canada’s main stock index rose on Monday to a new 20-month high, helped by gains for the technology and utilities sectors, as bond yields declined ahead of a Federal Reserve interest rate decision this week.

U.S. stocks also advanced, with the S&P 500 closing at a fresh record, with market participants bracing for the Fed as well as a slew of megacap earnings and U.S. economic data.

With the bellwether S&P 500 index up 3.3% so far in the first month of 2024, BlackRock raised its overall U.S. stocks view to “overweight” from “neutral.”

“Today is the calm before the storm,” said Ryan Detrick, chief market strategist at Carson Group in Omaha. “This is a truly headline-driven week, with earnings, the Fed, the jobs report and ongoing geopolitical uncertainties.”

“So with stocks at all time high, if we see any disappointments that could upset the apple cart and cause some well-deserved volatility,” Detrick added.

The U.S. Treasury said late in the session that it expects to borrow US$760 billion in the first quarter, US$55 billion lower than the October estimate primarily due to forecasts for increased net fiscal flows and higher cash balance. That contributed to the decline in bond yields, and in late afternoon trading, the benchmark U.S. 10-year yield was down 9.4 basis points to 4.066%. The Canadian 10-year bond yield was down about 4 basis points.

Concerns over a wave of supply due to the increasing federal deficit pushed yields near two-decade highs in October, though signs that inflation is cooling and the U.S. economy may be on pace for a soft landing has helped bring yields down since.

The Federal Open Markets Committee is scheduled to convene on Tuesday for its two-day monetary policy meeting, at which its voting members are widely expected to leave the key Fed funds target rate unchanged at 5.25% to 5.50%.

“Powell is probably going to be somewhat cautious. The Fed doesn’t want to be burned by inflation, and will push back on the (expected) March cut as a near certainty,” Detrick said.

Fed Chair Jerome Powell and other policymakers have warned not to expect interest rate cuts before inflation cools down to its average 2% annual target, but have also vowed to remain agile as they respond to economic data.

A spate of earnings from high profile tech and tech-adjacent momentum stocks waits in the wings, starting on Tuesday with Alphabet Inc and Microsoft Corp, Qualcomm Inc and Wednesday and culminating on Thursday with Apple Inc, Amazon.com and Meta Platforms Inc .

Other closely watched results include General Motors Inc on Tuesday, Boeing Co on Thursday, with oil supermajors Exxon Mobil Corp and Chevron Corp wrapping up the week on Friday.

This week’s roster of U.S. economic reports includes the labour market, with the Job Openings and Labor Turnover Survey, ADP, fourth-quarter employment costs, productivity, and planned layoffs, and the January employment report on Friday.

Case-Shiller home prices, consumer confidence, the Institute for Supply Management’s purchasing managers’ index, construction spending and factory orders are also on deck.

Robust economic data of late - particularly last week’s strong U.S. gross domestic product and personal consumption expenditures data - have simultaneously calmed fears of imminent recession and tossed cold water on hopes that the Fed would begin cutting interest rates as soon as March.

The Toronto Stock Exchange’s S&P/TSX composite index ended up 74.78 points, or 0.4%, at 21,200.06, its highest closing level since May 2022.

The technology sector rose 1.5% and utilities was up 0.7%. The latter includes many high-dividend paying stocks that could particularly benefit from a drop in borrowing costs.

Consumer discretionary was another standout, adding 0.9%.

Energy fell nearly 1%, with the price of oil settling 1.6% lower at US$76.78 a barrel as China’s ailing property sector sparked demand worries.

The Dow Jones Industrial Average rose 224.02 points, or 0.59%, to 38,333.45. The S&P 500 gained 36.96 points, or 0.76%, at 4,927.93 and the Nasdaq Composite advanced 172.68 points, or 1.12%, to 15,628.04.

Ten of the 11 S&P 500 sector indexes rose, led by consumer discretionary, up 1.37%, followed by a 0.97% gain in information technology. Energy sector was the sole declining sector.

Tesla Inc surged 4.2% after the electric car maker revealed capex plans.

Robot vacuum maker iRobot slid 8.8% as the company and Amazon scrapped merger plans in the face of opposition from EU antitrust regulators.

Meta Platforms rose 1.7% after brokerage Jefferies raised its target price on the stock to $455 from $425.

Warner Bros Discovery lost 1.2% as brokerage Wells Fargo downgraded the streaming platform to “equal weight” from “overweight.”

Financial technology firm SoFi Technologies jumped 20.2% after posting a fourth-quarter profit.

Stocks on the NYSE scored 397 new highs and 50 new lows.

On the Nasdaq 2,975 stocks rose and 1,314 fell as advancing issues outnumbered decliners by a roughly 2.3-to-1 ratio. The S&P 500 posted 45 new 52-week highs and no new lows while the Nasdaq recorded 226 new highs and 101 new lows. Volume on U.S. exchanges was relatively light, with 10.3 billion shares traded, compared to an average of 11.5 billion shares over the previous 20 sessions.

Reuters, Globe staff

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