TORONTO — Canada's main stock index rose Monday on broad-based strength, while U.S. markets were mixed as investors anticipated an interest rate cut later in the week, though the Dow set a new record.
Markets continued their recent trend of broadening, rotating away from large tech companies and toward a wider range of other sectors, said Brian Madden, chief investment officer with First Avenue Investment Counsel.
But a handful of large tech companies dragged U.S. markets lower, with the S&P 500 barely eking out a gain and the Nasdaq posting a small loss.
“The Magnificent Seven are kind of dragging down the S&P 500 and the Nasdaq,” said Madden.
In New York, the Dow Jones industrial average was up 228.30 points at 41,622.08. The S&P 500 index was up 7.07 points at 5,633.09, while the Nasdaq composite was down 91.85 points at 17,592.13.
The S&P/TSX composite index closed up 133.42 points at 23,702.07.
Over the past couple of months, markets have been broadening their holdings in anticipation of an interest rate cut from the U.S. Federal Reserve, he said — stocks in more interest-rate sensitive sectors are seeing more investor attention.
“People are looking wider and more broadly for opportunities, and are dusting off their files on cyclical and rate-sensitive areas of the market in a way that they haven’t done to this degree through much of this almost two-year-old cycle.”
This Wednesday, the Fed is widely expected to cut its key rate for the first time since it rapidly hiked it to fight inflation.
However, the market appears split on whether the Fed will cut by a quarter of a percentage point, or announce a bigger half-point cut. Some market watchers have been concerned that recent weakness in labour data means the Fed has waited too long to start cutting.
“All we can say with certainty is somebody’s going to be disappointed,” said Madden.
Madden thinks there are arguments to be made for both scenarios, but that a quarter-point cut is more likely. But even the central bank’s own officials may be at odds over the decision, he added.
“There could be a heated debate inside that boardroom,” he said.
What Fed governor Jerome Powell has to say on Wednesday will also be important, said Madden, as will the so-called “dot plot” the Fed is releasing, a projection for where the central bank sees its key rate going in the near future.
In Canada, higher oil prices helped boost the TSX, as did the financial sector — likely on the rate-cut anticipation, but also on new changes to mortgage rules in Canada that could mean more people entering the real estate market, said Madden.
The Canadian dollar traded for 73.57 cents US compared with 73.61 cents US on Friday.
The October crude oil contract was up US$1.44 at US$70.09 per barrel and the October natural gas contract was up six cents at US$2.37 per mmBTU.
The December gold contract was down US$1.80 at US$2,608.90 an ounce and the December copper contract was up three cents at US$4.27 a pound.
— With files from The Associated Press
This report by The Canadian Press was first published Sept. 16, 2024.
Companies in this story: (TSX:GSPTSE, TSX:CADUSD)
Rosa Saba, The Canadian Press
