U.S. and Canadian stocks ended with nominal gains on Tuesday after moving in a narrow range as investors parsed conflicting remarks from Federal Reserve officials, with upbeat U.S. consumer data providing some lift.
All the major stock indexes lost momentum as the session progressed, but ended the range-bound session in the green. The financials sector in Toronto remained under pressure throughout the day after Bank of Nova Scotia kicked off the latest earnings season for the banks with a big miss relative to Street expectations.
“Even marathon runners have to pause, to take a breath and a drink of water. That doesn’t mean the race is over,” said Oliver Pursche, senior vice president at Wealthspire Advisors, in New York. “It’s been a very strong November, and investors have every reason to be optimistic into year-end.”
Market participants are now scrutinizing remarks from monetary policymakers ahead of next month’s meeting of the Federal Open Market Committee (FOMC).
Fed Governor Christopher Waller said on Tuesday he is “increasingly confident” that the current level of central bank’s policy rate is sufficiently restrictive and even hinted at the possibility of rate cuts in the months ahead should inflation continue to fall closer to the Fed’s 2% target.
Chicago Fed President Austan Goolsbee touted progress in bringing inflation down at a pace not seen since the 1950s.
On the other hand, remarks from Fed Governor Michelle Bowman suggested another rake hike could be necessary to rein in inflation in a timely manner.
“The (Fed’s) mixed messaging is fairly normal and it occurs every time the Fed is near the end of a cycle, as certain members of the FOMC and certain Fed governors will feel more strongly than others that it’s time to stop (tightening),” Pursche added.
Financial markets have priced in a near-certain 98.9% likelihood that the FOMC will let the Fed funds target rate stand at 5.25%-5.50% when it convenes next month, according to CME’s FedWatch tool.
Markets are pricing in zero per cent odds that the Bank of Canada will hike interest rates again next month, and are now fully pricing in a quarter point rate cut by the central bank by next April. Canada’s third-quarter gross domestic product report and November employment numbers later this week could offer clues on the Bank of Canada’s interest rate outlook.
The crucial holiday shopping season has shifted into high gear, with survey data from the National Retail Federation suggesting consumers plan to spend about 5% more this year.
That corresponds with the Conference Board’s consumer confidence data released early Tuesday, which surprised to the upside due to improved near-term expectations.
Later in the week, the Commerce Department is due to release its second estimate for U.S. third-quarter Gross Domestic Product, and its broad-ranging Personal Consumption Expenditures (PCE) report, which covers income, spending and crucially, inflation.
The Toronto Stock Exchange’s S&P/TSX composite index ended up 4.11 points at 20,036.77, after earlier hitting its lowest intraday level in two weeks.
The energy sector rallied 0.8% as the price of oil settled 2.1% higher at US$76.41 a barrel on the possibility OPEC+ will extend or deepen supply cuts.
The materials group, which includes precious and base metals miners and fertilizer companies, added 2.5% as gold climbed to a more than six-month high, driven by a retreating U.S. dollar and expectations that the U.S. Federal Reserve has finished hiking interest rates.
Bank of Nova Scotia shares fell 4.4% while the financials sector lost 0.8%.
Shares of First Quantum Minerals Ltd shed 0.8% after Panama’s Supreme Court ruled the miner’s contract to operate a lucrative copper mine in the Central American nation is unconstitutional.
The TSX is on track for a monthly advance of 6.2%, which would be its biggest since January, as hopes grow that global interest rates have peaked.
The Dow Jones Industrial Average rose 83.51 points, or 0.24%, to 35,416.98, the S&P 500 gained 4.46 points, or 0.10%, at 4,554.89 and the Nasdaq Composite added 40.73 points, or 0.29%, at 14,281.76.
Eight of the 11 major sectors of the S&P 500 closed in positive territory, with consumer discretionary shares posting the largest percentage gain. Healthcare stocks suffered the day’s biggest percentage loss.
Boeing advanced 1.4% after RBC Capital Markets upgraded the stock to “outperform” from “sector perform.”
U.S.-listed shares of Chinese e-commerce firm PDD Holdings surged 18.1% after the company beat revenue estimates.
Affirm Holdings jumped 11.5%, extending its Cyber Monday boost.
Chipmaker Micron Technology’s shares slid 1.8% after the company said it expects higher first-quarter operating expenses than previously forecast.
Advancing issues outnumbered decliners on the NYSE by a 1.24-to-1 ratio; on Nasdaq, a 1.07-to-1 ratio favored decliners. The S&P 500 posted 20 new 52-week highs and one new low; the Nasdaq Composite recorded 61 new highs and 103 new lows. Volume on U.S. exchanges was 10.03 billion shares, compared with the 10.41 billion average for the full session over the last 20 trading days.
Reuters, Globe staff