Canada’s main stock index rose on Wednesday to its highest closing level in five months, lifted by technology and industrial shares as the Federal Reserve signaled it could slow the pace of interest rate hikes. Wall Street also gained ground.
A “substantial majority” of policymakers agreed it would “likely soon be appropriate” to slow the pace of interest rate hikes, minutes from the most recent Federal Reserve meeting showed.
“What equity markets needed to see for the recent strength to continue was what we got from the minutes,” said Michael James, managing director of equity trading at Wedbush Securities in Los Angeles.
Since the Fed’s last meeting on Nov. 1-2, investors have been more optimistic that price pressure has started to ease, meaning smaller rate hikes could curtail inflation.
Earlier on Wednesday, a mixed bag of U.S. economic data led to a drop in yield on the benchmark 10-year Treasury note, helping drive stocks up.
Bond yields were also lower in Canada, with the benchmark 10-year government issue down 5 basis points by late afternoon to below 3% for the first time since August. One month ago, it reached a peak of 3.67%.
Sal Guatieri, senior economist at BMO Capital Markets, said whether the bond price rally sticks will ultimately depend on inflation. Bond yields move inversely to bond prices.
“We are skeptical, and still see a backup to the 3.4% range if the BoC rattles off another 75 basis points in rate hikes by early next year. That said, if inflation has truly peaked and trends lower, long-term rates shouldn’t revisit their earlier highs,” Mr. Guatieri said in a note.
The number of Americans filing new claims for unemployment benefits rose more than expected last week and U.S. business activity contracted for a fifth straight month in November. Consumer sentiment ticked higher and home sales rose above expectations.
“What I think you’re seeing is renewed investor enthusiasm fueled by those who see that beautiful light at the end of what has been a very dark tunnel. And there has been so much money on the sidelines that is rushing back into the markets and waiting to get back into the action,” said portfolio manager Moez Kassam of Anson Funds.
The S&P/TSX composite index ended up 62.25 points, or 0.3%, at 20,282.26, its highest closing level since June 9.
“To the extent that investors are still bearishly positioned, there is a good chance that we are going to see a further rally into the end of the year,” said Mike Archibald, a portfolio manager at AGF Investments.
The TSX industrials sector, which includes railroad and airline stocks, rose 0.4%, while technology ended 1.9% higher.
“Industrials continue to be a massive leader in this market and I view that as very positive for future prospects for the broader economy,” Mr. Archibald said. “Many of the companies that I’m speaking to across a number of different industries are indicating that the demand environment for their products across a number of different industries still remains very robust.”
Capping gains for the market was a drop in energy. The sector fell 1.2% as the price of oil settled 3.7% lower at US$77.94 a barrel.
The move lower in oil came as the Group of Seven (G7) nations considered a price cap on Russian oil above the current market level and gasoline inventories in the United States built by more than analysts’ expected.
Among stocks seeing action in Toronto was software and cloud-solutions company Converge Technology Solutions, rallying 22.6% after announcing it has commenced a strategic review process, including evaluations on a possible sale, merger or divesture.
The Dow Jones Industrial Average rose 95.96 points, or 0.28%, to 34,194.06, the S&P 500 gained 23.68 points, or 0.59%, at 4,027.26 and the Nasdaq Composite added 110.91 points, or 0.99%, at 11,285.32.
Trading volume was thin ahead of the Thanksgiving holiday on Thursday, with the U.S. stock market open for a half-session on Friday.
Tesla Inc jumped 7.82% with Citigroup upgrading the electric-vehicle maker’s stock to “neutral” from a “sell” rating.
Deere & Co soared 5.03% after the farm equipment maker reported a higher-than-expected quarterly profit.
Nordstrom Inc fell 4.24% as the fashion retailer cut its profit forecast amid steep markdowns to attract inflation-wary customers.
Volume on U.S. exchanges was 9.25 billion shares, compared with the 11.6 billion average for the full session over the last 20 trading days. Advancing issues outnumbered decliners on the NYSE by a 1.97-to-1 ratio; on Nasdaq, a 1.61-to-1 ratio favored advancers. The S&P 500 posted 21 new 52-week highs and no new lows, while the Nasdaq Composite recorded 97 new highs and 126 new lows.
Reuters, Globe staff
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