Major North American stock indexes closed sharply higher on Friday, with the tech-heavy Nasdaq posting its biggest first-half gain in 40 years as inflation showed signs of cooling while Apple returned to a $3 trillion market valuation.
Canada’s main stock index closed the month with its highest monthly gain since January, boosted by gains in the technology and material sectors. It closed higher every day this week, enough the make it the TSX’s best weekly performance since February 2021.
Apple Inc breached the $3 trillion mark for the first time since January 2022, lifted by growing appetites for growth stocks generally as well as bets the iPhone maker will succeed in new markets.
Investors perked up on signs of cooling U.S. inflation from measures that are closely watched by the Federal Reserve. A Commerce Department report showed the Personal Consumption Expenditures (PCE) index advanced 3.8% versus April’s 4.3%. Excluding volatile food and energy, the core PCE index gained 0.3%, down from 0.4% in the previous month.
The data fueled hopes the Fed could be near the end of its rate-hiking cycle. It helped that Treasury yields fell in response to cooling inflation, said Burns McKinney, portfolio manager at NFJ Investment Group in Dallas, Texas.
“Everything is going up because you’re seeing the economy cooling but not that much. The Fed might have a better-than-we-thought shot of threading the needle and cooling inflation without killing the economy in the process,” said McKinney.
The money manager said he did not think the Fed can dampen inflation without causing a recession, yet “the chances are going up.”
The Toronto Stock Exchange’s S&P/TSX composite index ended up 242.12 points, or 1.22%, at 20,155.29.
Canada’s economy regained momentum in May after stalling in April, Statistics Canada data showed Friday, leaving the door open for the Bank of Canada to hike interest rates in July.
“Consumers are healthy, wage growth is strong. It removes a lot of the fear that the banks could end up with a lot of loan losses,” said Lorne Steinberg, president, Lorne Steinberg Wealth Management Inc, noting gains across sectors on Friday.
“It’s more than the GDP numbers giving comfort to investors that things are still pretty good.”
In a separate report, the Bank of Canada said Canadian businesses still see inflation running high before edging down slowly, at a time when labor market and wage pressures are seen easing.
The materials sector, which houses Canada’s major mining firms, gained 1.74%, tracking higher metal prices.
Heavyweight financials rose 01.09%, while technology added 1.74% and consumer discretionary gained 1.41%.
Among the bigger movers of the day, FirstService jumped 2% after brokerage BMO upgraded the real estate firm to “outperform” from “market perform”.
Canada Goose was among the best performer, gaining 5.7%.
Bausch + Lomb closed 1.14% higher after the contact lens maker said it would purchase a dry-eye drug from Swiss pharma company Novartis for $1.75 billion.
According to preliminary data, the S&P 500 gained 53.37 points, or 1.21%, to end at 4,449.81 points, while the Nasdaq Composite gained 193.85 points, or 1.43%, to 13,785.18. The Dow Jones Industrial Average rose 278.00 points, or 0.81%, to 34,400.42.
The Nasdaq composite registered its strongest first-half performance in 40 years while the Nasdaq 100 index of top technology stocks boasted its biggest first half gain on record.
The S&P 500′s growth index rose and investor favorites such as Amazon, Microsoft, Alphabet and Nvidia were all extending a blistering rally fueled by strong earnings and a buzz around artificial intelligence.
Small cap stocks were also attracting attention with the Russell 2000 index registering its fifth straight day of gains, its longest winning streak since the five sessions ending March 3.
Still, traders were pricing in an 86.8% chance that the Fed will hike rates by 25 basis points to 5.25%-5.50% range in its July meeting, according to CMEGroup’s Fedwatch tool, down slightly from the 89.3% on Thursday.
Hawkish remarks from Fed Chair Jerome Powell and strong economic data earlier this week boosted bets the Fed will keep hiking rates, but stock markets took comfort in signs of strength in the U.S. economy.
The CBOE Market Volatility Index, Wall Street’s fear gauge, earlier slipped to a one-week low at 12.96 points.
Among single stocks, Nike Inc fell after it forecast first-quarter revenue below Wall Street expectations.
Carnival Corp shares jumped after Jefferies upgraded the cruise operator’s stock to “buy” from “hold.”
Reuters, Globe staff
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