TORONTO — Canada's main stock index was up almost 200 points Wednesday on broad-based gains led by utilities and base metals after the central bank raised interest rates to five per cent, while U.S. stock markets also rose after a new report showed inflation cooling last month.
The S&P/TSX composite index was up 192.21 points at 20,070.77.
In New York, the Dow Jones industrial average was up 86.01 points at 34,347.43. The S&P 500 index was up 32.90 points at 4,472.16, while the Nasdaq composite was up 158.26 points at 13,918.96.
The Bank of Canada’s rate hike was not a surprise to investors, said Lesley Marks, chief investment officer of equity at Mackenzie Investments.
“Over the last week or so, it looked more and more likely that the Bank of Canada was going to move. So I think that this was generally priced into the market,” she said.
The announcement by the central bank came on the heels of hotly anticipated inflation data in the U.S., which showed price growth slowed significantly in June.
“I think that people were a little bit pleasantly surprised with the inflation data in the U.S., and that moved both Canadian and U.S. yields lower to start the day,” said Marks.
After the Bank of Canada’s announcement, yields maintained their decline and bonds rallied, she said.
The good news on inflation has made the Federal Reserve’s upcoming rate decision less certain, said Marks, with some thinking a pause is more likely.
While the Bank of Canada’s messaging Wednesday was still hawkish, investors seem heartened by the bank’s forecast of economic growth hovering around one per cent for the next year, said Marks.
“I would say despite that hawkish commentary, there is reason to believe if their forecasts do come through, that the Bank of Canada can support another pause,” said Marks, noting there’s plenty of data to come before the central bank’s September meeting.
However, she said continued economic strength has made rate cuts unlikely this year in both Canada and the U.S.
All eyes will now turn to earnings season, which kicks off at the end of the week with the big U.S. banks providing insight into how consumers are faring, said Marks.
Equities have been making small but notable moves toward sectors that lagged in the first half of the year, she noted, with materials and energy posting gains and gold rising higher over the past few days.
“It has been interesting to see that we've seen a broadening out of equity markets beyond that very narrow technology-focused rally that we saw in the first half of the year,” said Marks.
“It's a sign of increasing health in the market when we see more companies participating in the rally … early days, but it’s certainly something directionally which is positive.”
The Canadian dollar traded for 75.83 cents UScompared with 75.41 cents US on Tuesday.
The August crude contract was up 92 cents at US$75.75 per barrel and the August natural gas contract was down 10 cents at US$2.63 per mmBTU.
The August gold contract was up US$24.60 at US$1,961.70 an ounce and the September copper contract was up nine cents at US$3.85 a pound.
This report by The Canadian Press was first published July 12, 2023.
Companies in this story: (TSX:GSPTSE, TSX:CADUSD=X)
Rosa Saba, The Canadian Press
