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Canada’s main stock index on Thursday posted its biggest advance in two months, with resources leading broad-based gains, as weaker-than-expected U.S. retail sales data raised prospects of an early start to Federal Reserve interest rate cuts.

The S&P/TSX composite index ended up 333.29 points, or 1.6%, at 21,222.69. It was the index’s biggest gain since Dec. 13 but stopped short of its recent 21-month high at 21,227.87.

U.S. retail sales fell by 0.8% in January, the most in 10 months, weighed by declines at auto dealerships and gasoline service stations. But economists cautioned against reading too much into the sharp drop amid frigid weather and difficulties adjusting the data for seasonal fluctuations at the start of the year.

The “data are not necessarily bad news for the market,” said Angelo Kourkafas, investment strategist at Edward Jones Investments. “It implies that the exceptional strength we have seen on the consumer side is fading a bit and the Fed won’t have to worry that strong economic growth will reaccelerate inflation.”

Bets for a Federal Reserve rate cut of at least 25 basis points in May edged up to 40%, while the odds for June stood at roughly 79%, according to the CME Group’s FedWatch Tool.

In other U.S. data Thursday, a Labor Department report showed initial claims for state unemployment benefits stood at 212,000 for the week ended Feb. 10, lower than the estimated 220,000.

On Friday, a producer price index report will provide more clues about the economy.

A rally in the energy sector helped the Canadian market to outperform Wall Street. It jumped 4.3% as the price of oil settled 1.8% higher at US$78.03 a barrel, and the materials group added 2.4%.

Metal mining companies were helped by higher gold and copper prices, with Seabridge Gold surging 19.1% as it rebounded from a near four-year low.

Nine of the Toronto market’s major sectors ended higher, with heavily weighted financials adding 1.6%. Financials were helped by an 8.7% jump in the shares of Manulife Financial Corp after the insurer topped estimates for fourth-quarter results.

MTY Food Group Inc was among the worst performing stocks. Its shares tumbled 13.9% after the restaurant operator reported its fourth-quarter results.

The S&P 500 gained 29.05 points, or 0.58%, to end at 5,029.67 points, while the Nasdaq Composite gained 47.03 points, or 0.30%, to 15,906.17. The Dow Jones Industrial Average rose 350.07 points, or 0.91%, to 38,774.73.

Alphabet dropped 2.17% after investment firm Third Point dissolved its stake in the megacap.

Apple shares were pressured as Warren Buffett’s Berkshire Hathaway trimmed its large stake in the iPhone-maker and Soros Fund Management entirely dissolved its stake. But the stock bounced in late trading and closed down just 0.1%.

Investor optimism over the corporate sector is growing, as 80.3% of S&P 500 companies have now beaten earnings expectations, LSEG data showed, surpassing the annual 76% average.

CBRE Group soared 8.5% after forecasting annual profit largely above estimates, driving a rise in the S&P 500 real estate sector.

Wells Fargo jumped 7.2% after the bank said the U.S. Office of the Comptroller of the Currency has terminated a 2016 consent order over the bank’s sales practices misconduct.

Recently underperforming sectors such as utilities, materials and energy notched strong gains in the U.S. The small-cap Russell 2000 Index also advanced 2.3%.

Cisco Systems fell 2.43% as it announced plans to cut 5% of its global workforce and lowered its annual revenue target.

Deere & Co, the world’s largest farm-equipment maker, lost 5.2% after cutting its 2024 profit forecast. West Pharmaceutical Services tumbled 14.1% after forecasting full-year results below estimates.

Advancing issues outnumbered decliners by a 5.3-to-1 ratio on the NYSE, while on Nasdaq advancing issues outnumbered decliners by a 2.4-to-1 ratio. On U.S. exchanges 12.24 billion shares changed hands compared with the 11.7 billion moving average for the last 20 sessions.

Reuters, Globe staff

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