U.S. stocks ended higher on Monday following last week’s losses, but caution prevailed ahead of Wednesday’s consumer prices report and the start of second-quarter earnings later this week. The TSX ended slightly in the red.
Investors are anxious to see if price pressures are continuing to moderate. That could shed light on the interest rate outlook, with many traders expecting the Federal Reserve to raise interest rates by 25 basis points this month.
The Bank of Canada is also heading toward a second consecutive quarter-point rate hike on Wednesday, most economists believe, after a month of economic data showed resilient growth and sticky underlying inflation. Twenty of 24 economists surveyed by Reuters expect a 25-basis-point rate hike and anticipate the central bank to “hold” rates steady into 2024.
Investors were digesting comments from several Fed officials who said on Monday additional rate hikes are needed to bring down inflation that is still too high, but the end to the U.S. central bank’s current monetary policy tightening cycle is getting close.
“The market is obviously poised for the opening of earnings season,” but investors are also hyper-focused on consumer prices and the outlook for interest rates, said Quincy Krosby, chief global strategist at LPL Financial in Charlotte, North Carolina.
S&P 500 company earnings are due to unofficially kick off this week with reports from some big U.S. banks. Analysts expect earnings to have fallen 6.4% in the second quarter from the year-ago period, IBES data from Refinitiv showed.
Shares of chipmakers Intel and Qualcomm rose after U.S. Treasury Secretary Janet Yellen said over the weekend that meetings with senior Chinese officials were “direct” and “productive.”
Also on Monday, Citigroup strategists downgraded U.S. stocks to “neutral,” and said megacap growth is set for a pullback and U.S. recession risks could still bite.
The Dow Jones Industrial Average rose 209.52 points, or 0.62%, to 33,944.4, the S&P 500 gained 10.58 points, or 0.24%, at 4,409.53 and the Nasdaq Composite added 24.77 points, or 0.18%, at 13,685.48.
The Toronto Stock Exchange’s S&P/TSX composite index closed down 8.59 points, or 0.04%, at 19,822.45.
Utilities stocks on the TSX slipped 1.4%. Canada’s technology sector gained 0.2%.
Helping limit losses, energy stocks gained 0.4% as expected crude supply cuts from Saudi Arabia and Russia briefly supported the oil market. Materials, which houses Canada’s major mining firms, rose 1.2%.
Among stock moves in Toronto, K92 Mining rose nearly 12% after reporting a jump in production of gold, copper and silver output at its Kainantu mine in Papua New Guinea.
Quebecor was among the biggest losers, declining 4.3%
Volume on U.S. exchanges was 10.20 billion shares, compared with the 11.09 billion average for the full session over the last 20 trading days. Advancing issues outnumbered decliners on the NYSE by a 2.23-to-1 ratio; on Nasdaq, a 2.06-to-1 ratio favored advancers. The S&P 500 posted 28 new 52-week highs and four new lows; the Nasdaq Composite recorded 59 new highs and 47 new lows.
Reuters, Globe staff