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North American equity markets closed slightly higher on Wednesday, as fresh U.S. inflation data reinforced investor hopes that the Federal Reserve is done raising interest rates. The Canadian benchmark stock index saw its fifth straight day of gains, although food retailers lost ground after reporting quarterly results.

Stocks had rallied on Tuesday after a softer-than-expected consumer price index reading boosted optimism that the Fed might be able to avoid raising rates further.

Additional data on Wednesday showed the biggest decline in producer prices in 3-1/2 years in October on the back of cheaper gasoline, offering more evidence of easing price pressures. The Producer Price Index was down 0.5% month on month, well below the estimate of a 0.1% rise.

Also on Wednesday, U.S. retail sales data showed a smaller-than-expected decline of 0.1% in October, against forecasts of a 0.3% fall, according to economists polled by Reuters.

“Those two data points reaffirmed the message from Tuesday that the Fed seems to be navigating the soft landing quite well,” said Ronald Temple, chief market strategist at Lazard.

After the big move in Wall Street’s three major indexes in the previous session, Temple said Wednesday’s data “doesn’t change the narrative.”

Money market traders have fully priced in odds that the U.S. central bank will keep rates steady in December. They also see the first rate cut of the cycle to kick off next spring in both the U.S. and Canada.

Bond yields bounced back on Wednesday, however, with the U.S. benchmark 10-year yield up about 10 basis points to 4.540%. Canadian bond yields were up by a similar degree.

Treasury yields, which move in the opposite direction of prices, plummeted on Tuesday following softer than expected consumer inflation data, pushing the 10-year Treasury yield down by its largest daily amount since March.

The mixed economic data Wednesday will likely stall any further large moves in yields, said Ian Lyngen, head of U.S. rates strategy at BMO Capital Markets Fixed Income Strategy Team.

“We expect the market will drift sideways from here and a downward bias in yields will emerge as the weekend approaches,” he said.

Meanwhile, investors Wednesday were also watching for the outcome of the first meeting in a year between U.S. President Joe Biden and Chinese leader Xi Jinping on Wednesday, hoping the talks could ease friction between the superpowers on military conflicts, drug-trafficking and artificial intelligence.

Further aiding the mood, the U.S. House of Representatives passed a temporary spending bill that would avert a government shutdown, with broad support from lawmakers from both parties.

To prevent a shutdown, the Senate and Republican-controlled House must enact a legislation that Biden can sign into law before current funding for federal agencies expires at midnight on Friday.

The S&P/TSX composite index ended up 34.16 points, or 0.2%, at 20,057.89, its highest closing level since Sept. 20.

The Toronto market’s technology sector added 2.1%, while utilities rose 1.2% and heavily-weighted financials ended 0.4% higher.

Energy was a drag, falling 1.2%, as oil settled down 2% at US$76.66 a barrel. Oil was pressured by a bigger-than-expected rise in U.S. crude inventories and record U.S. crude production.

Consumer staples was another weak spot, falling 2.6%, as investors weighed the results of major food retailers. Metro Inc shares fell 6.8% and shares of Loblaw Companies Ltd gave back their earlier gains to end 2.2% lower.

On Wall Street, shares in Target surged 17.8% in its biggest one-day percentage gain since August 2019 after the retailer forecast a fourth-quarter profit largely above expectations on easing supply-chain costs.

Target’s bright outlook lifted shares of other retailers including Macy’s, which rose 7.5%, and Kohl’s, which closed up almost 9%. The S&P 500 consumer staples index , which includes Target, was the top sector gainer, adding 0.7%.

The Dow Jones Industrial Average rose 163.51 points, or 0.47%, to 34,991.21, the S&P 500 gained 7.18 points, or 0.16%, at 4,502.88 and the Nasdaq Composite added 9.46 points, or 0.07%, at 14,103.84.

The benchmark S&P 500 and tech-heavy Nasdaq had posted their biggest daily percentage gains in more than six months on Tuesday, after the consumer prices data.

Among the S&P 500′s 11 major sectors energy was the biggest decliner, down 0.3%, followed closely by utilities. After consumer staples, communications services advanced the most, with a boost from Walt Disney. The entertainment company rose 3% after reports that activist investor ValueAct Capital had acquired a stake.

The Russell 2000 index again advanced, after closing 5.4% higher on Tuesday, as the prospect of stalling rate hikes provides particular relief to smaller companies, which are more dependent on floating rate loans.

Among individual stocks, retailer TJX’s shares fell 3.3% after it forecast current-quarter profit below Wall Street expectations, signaling spiraling costs weighing on margins.

Sirius XM shares rallied 6% after Warren Buffett’s Berkshire Hathaway took a stake in the audio entertainment company.

On U.S. exchanges 11.67 billion shares changed hands, above the 11.15 billion average for the last 20 sessions. Advancing issues outnumbered decliners on the NYSE by a 1.36-to-1 ratio; on Nasdaq, a 1.32-to-1 ratio favored advancers. The S&P 500 posted 42 new 52-week highs and no new lows; the Nasdaq Composite recorded 106 new highs and 89 new lows.

Reuters, Globe staff

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