Canada’s main stock index climbed on Wednesday, boosted by materials and financial stocks, while investors awaited more clues on the interest rate cut trajectory of the Federal Reserve for the year.
At 10:46 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was up 60.43 points, or 0.31%, at 22,144.53.
Materials-linked shares rose 0.9% as copper prices hit a two-week high, while gold prices took a breather after hitting a fresh record high.
Energy shares rose 0.5% and were set to extend their rally to a fifth session on gaining oil prices, as investors mulled supply risks stemming from global geopolitical conflicts, while OPEC+ ministers held current output cuts in a meeting.
Heavy-weight financials also rose 0.7%, while healthcare shares gained 0.6%.
The benchmark Canadian index had pulled back from a series of record closing highs in the previous session, as uncertainty around the Federal Reserve’s interest rate cut trajectory clouded investor sentiment.
“The markets and the Fed are pricing in three cuts, but now we’re starting to hear some Fed governors talking about just one or two. If we get close to June, and inflation doesn’t get closer to target, we could be down to two cuts for the rest of the year,” said Allan Small, senior investment advisor of the Allan Small Financial Group with iA Private Wealth.
In the U.S., private payrolls increased more than expected in March, while a separate reading showed U.S. services industry growth slowed in March.
Investor focus will now shift to Fed Chair Jerome Powell’s speech in the San Francisco Bay area at 12:10 p.m. ET on Wednesday.
“Powell said last time that three rate cuts are still on the table. He may say something different today and it could be market moving,” Small said.
In Canadian corporate news, shares of professional services firm WSP Global fell 4.7% after short-seller Spruce Point Capital Management shorted the company.
Lightspeed Commerce shares gained 4.9% after the payments company announced 2800 job cuts, looking to turn profitable.
U.S. stock indexes are holding steadier Wednesday following their worst day in weeks.
The S&P 500 was 0.2% higher in morning trading and clawing back a bit of its 0.7% loss from the prior day. The Dow Jones Industrial Average was up 64 points, or 0.2%, and the Nasdaq composite was 0.1% higher.
Cal-Maine Foods rose 6% after reporting stronger profit for the latest quarter than expected by selling a record number of eggs. Intel, meanwhile, sank 6.2% after disclosing financial details about key parts of its business for the first time, including its foundry business, which is losing money.
Stocks have broadly slowed their roll since screaming 26% higher from November through March. Worries are rising that a remarkably resilient U.S. economy could prevent the Federal Reserve from delivering as many cuts to interest rates this year as earlier hoped. Critics have also been saying at least a pullback was overdue after stock prices had grown expensive by several measures.
The Fed has been indicating that it still may cut its main interest rate three times this year. Lowering its main rate from the highest level since 2001 would offer relief to the economy and financial system, while also boosting prices for investments. But Fed officials say they will start cutting only if more evidence arrives to show inflation is heading down toward their goal of 2%.
Several reports on the economy have come in stronger than expected recently. Such strength is encouraging to Wall Street because it means the economy continues to avoid a recession, and it should provide support for corporate profits. But it also could add upward pressure on inflation and discourage the Fed from cutting rates.
Traders took encouragement from a report on Wednesday morning showing that construction, retail and other U.S. services businesses continued to grow last month, but not by as much as economists expected. Perhaps more importantly, the report from the Institute from Supply Management also said that an index of prices paid was at its lowest level since March 2020. That’s an encouraging trend for inflation.
That followed a report from earlier in the morning that showed stronger gains than expected in hiring within the private sector. That report from the ADP Research Institute suggested employers accelerated their hiring last month, when economists were forecasting a slowdown.
A more comprehensive report on the job market for March will arrive from the U.S. government on Friday, and it will likely be the week’s headline economic data.
Traders have already drastically reduced their expectations for how many times the Federal Reserve will cut interest rates this year, halving them from a forecast of six at the start of the year. Some are preparing for two or even zero cuts this year because the Fed may not want to begin lowering rates too close to November’s election out of fear of appearing political.
In the bond market, yields rose to raise the pressure on stocks. The 10-year yield climbed to 4.39% from 4.36% late Tuesday. It trimmed its advance following the cooler-than-expected report on U.S. services businesses.
The two-year yield, which more closely tracks with expectations for Fed action, rose to 4.71% from 4.70%.
A climb in oil prices has also been adding pressure on inflation. A barrel of benchmark U.S. crude climbed again, up 0.9% to $85.78 to bring its gain for the year so far to nearly 20%. Brent crude, the international standard, rose by a similar amount and is up more than 16% so far in 2024.
In stock markets abroad, European indexes were mixed amid modest movements. A report showed that inflation in Europe cooled by more than expected in March, but analysts say that might not be enough to move up the European Central Bank’s first cut to interest rates.
Asian markets fell more sharply earlier in the day, following up on Wall Street’s losses from Tuesday. Indexes fell 1.7% in Seoul, 1% in Tokyo and 1.2% in Hong Kong.
Reuters and The Associated Press
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