U.S. and Canadian major stock indexes closed higher after a choppy session Wednesday, with the release of minutes from the U.S. Federal Reserve’s last meeting showing caution among policy makers that helped fuel investor hopes that rates would stay steady.
The Fed pointed to uncertainties around the economy, oil prices and financial markets as supporting “the case for proceeding carefully in determining the extent of additional policy firming that may be appropriate,” according to the minutes released on Wednesday from the Sept. 19-20 meeting.
Trading was choppy with indexes starting off the session with gains before turning lower ahead of the minutes and then regaining lost ground.
Along with recent moves in interest rates and dovish comments from Fed officials in the last few days, Angelo Kourkafas, senior investment strategist at Edward Jones, said the minutes appeared encouraging for investors.
“Today’s release highlights the risk of over-tightening, and knowing what has happened over the past three weeks with interest rates, that provides some comfort to investors that we’re not going to see another rate hike,” said Kourkafas.
But he noted that the Fed’s next decisions will take into account the U.S. consumer price reading for September, due out on Thursday as the Fed’s “data dependence hasn’t gone away.”
Earlier on Wednesday, data showed that U.S. producer prices increased more than expected in September amid higher costs for energy products, but underlying inflation pressures at the factory gate continued to moderate.
Earlier, Fed Governor Michelle Bowman repeated her view that the U.S. central bank will probably need to tighten monetary policy further, while Fed Governor Christopher Waller said the central bank is in a position to watch and see what happens with interest rates.
Yields on benchmark 10-year notes fell to roughly two-week lows as investors flocked to safe haven bets as the war in the Middle East raged after a deadly weekend attack by Hamas on Israel killed hundreds.
Israel continued to pound Gaza with retaliatory air strikes, killing hundreds of Palestinians, including women and children. Israel formed an emergency unity government on Wednesday and its army said it killed three Hamas militants.
The S&P/TSX composite index ended up 162.64 points, or 0.8%, at 19,663.84, its highest closing level since Sept. 25. It was the fifth session in a row the Canadian benchmark closed higher. Both U.S. and Canadian bond yields eased for the most part, which supported dividend-heavy sectors. Financials rose 1.2% and Telecoms 1.8%. Real estate gained 1.4% and utilities ended 1.8% higher.
Shares of Rubik’s Cube-owner Spin Master rose nearly 6% after the company said it will buy U.S.-based toy-maker Melissa & Doug for $950 million in cash.
The materials group added 0.8% but energy was a laggard. It fell 0.1% as U.S. crude oil futures settled 2.9% lower at $83.49 a barrel after top OPEC producer Saudi Arabia pledged to help stabilize the market.
“Rates are in the driver’s seat,” said Angelo Kourkafas, senior investment strategist at Edward Jones. “We have seen rates pull back for three straight days and that has helped stocks.”
In New York, the Dow Jones industrial average was up 65.57 points at 33,804.87. The S&P 500 index was up 18.71 points at 4,376.95, while the Nasdaq composite was up 96.83 points at 13,659.68.
The U.S. energy index was dragged down during the session due to a slump in Exxon Mobil shares after the oil and gas producer agreed to buy rival Pioneer Natural Resources in an all-stock deal valued at $59.5 billion. Exxon closed down 3.5%.
Reuters, Globe staff