U.S. and Canadian main stock indexes gained on Tuesday, shaking off an unconfirmed report of Russian missiles crossing into Poland that sparked volatility, as investors seized on softer-than-expected inflation data that raised hopes of a pullback in rate hikes by the U.S. Federal Reserve. Energy and tech stocks led the advance in Toronto.
Equities were boosted by Tuesday’s inflation report that showed producer prices rising 8% in the 12 months through October against an estimated 8.3% rise.
The gains built on a rally that kicked off late last week by a cooler-than-expected report on consumer prices.
“The market has been driven by the inflation number that came out a little bit lower than expected and confirmed last week’s number to some degree that we may have rounded the corner on inflation,” said Peter Tuz, president of Chase Investment Counsel in Charlottesville, Virginia.
The market was “a little bit more volatile this afternoon as news stories came out about the Russian missile landing in Poland,” Tuz said.
Two people were killed in an explosion in Przewodow, a village in eastern Poland near the border with Ukraine, firefighters said as NATO allies investigated reports that the blast resulted from Russian missiles.
The Associated Press earlier cited a senior U.S. intelligence official as saying the blast was due to Russian missiles crossing into Poland. But the Pentagon said it could not confirm that account.
Stocks pulled back around mid-day after the report, with the Dow turning negative, before they steadied.
“The decline was triggered by reports of a Russian missile landing in Poland,” said Steve Sosnick, chief strategist at Interactive Brokers. “This could develop into something far worse, but right now markets are nervous, not panicked.”
The Toronto Stock Exchange’s S&P/TSX composite index ended up 72.97 points, or 0.4%, at 19,994.78.
The Toronto market’s energy sector rose 1.7% as oil settled 1.2% higher at $86.92 a barrel, boosted by news that oil supply to Hungary via the Druzhba oil pipeline has been temporarily suspended due to a fall in pressure.
Technology was also a standout, advancing 2.3%.
The Dow Jones Industrial Average rose 56.22 points, or 0.17%, to 33,592.92, the S&P 500 gained 34.48 points, or 0.87%, to 3,991.73 and the Nasdaq Composite added 162.19 points, or 1.45%, to 11,358.41.
Shares of Walmart Inc jumped 6.5% after the top U.S. retailer lifted its annual sales and profit forecasts, benefiting from a steady demand for groceries despite higher prices.
Shares of other retailers, including Target Corp and Costco, also rose following Walmart’s report. Target, which is due to report on Wednesday, rose 3.9%, while Costco gained 3.3%.
Home Depot shares rose 1.6% after the home improvement chain’s results showed it tapped higher prices to override a drop in customer transactions for the third quarter.
In other markets, the Canadian dollar rose to an eight-week high against its U.S. counterpart on Tuesday, but gains were capped as the greenback was supported by geopolitical jitters and investors waited for a key domestic inflation report.
The loonie was trading 0.3% higher at 1.3268 to the greenback, or 75.37 U.S. cents, after touching its strongest since Sept. 20 at 1.3227.
Canada’s inflation data for October is awaited by investors on Wednesday for clues as to whether the Bank of Canada would raise interest rates by 25 or 50 basis points at its next policy announcement on Dec. 7.
The central bank tightened rates by 50 basis points to a 14-year high of 3.75%, but it has opened the door to a smaller hike.
Canadian wholesale trade increased 0.1% in September from August, beating expectations for a 0.2% decline. Separate data showed manufacturing sales were unchanged in September from August, an outcome that was also stronger than expected.
Canadian bond yields were mixed across the curve even as U.S. Treasury yields fell. The 10-year was little changed at 3.156%.
Reuters, Globe staff
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