The Toronto Stock Exchange zoomed past its previous record on Wednesday with the main index closing at a new peak as profits and commentary from the country’s biggest bank boosted investor sentiment and hopes around the economy.
A good part of the gain was also contributed by high oil prices, which spurred buying activity in oil and gas shares.
The S&P/TSX composite index closed up 0.33% to 28,433 points, led by the biggest intraday share price jump for Royal Bank of Canada since the pandemic. RBC, Canada’s largest publicly listed company by market capitalization, beat profit estimates for the quarter ended July 31 and set aside a smaller portion of money for loan losses than analysts had forecast. its shares ended up 5% after rising 7.5% in intraday trading.
RBC’s stellar earnings closely followed similar performances by Canada’s fourth- and fifth-biggest lenders Bank of Montreal and Bank of Nova Scotia the previous day.
“It’s one word - earnings. Earnings have been great, and I think we overestimated how much impact the tariffs would have on corporate North America,” Barry Schwartz, chief investment officer at Baskin Wealth Management, said of the new TSX record.
“The fact of the matter is the largest companies on the Toronto Stock Exchange and the U.S. exchanges are not really impacted materially by tariffs. And that’s the bottom line,” he said.
The TSX has been on a growth trajectory after a major slump in April when U.S. President Donald Trump’s tariff threats filled investors with uncertainty around the future of the Canadian economy. Since then, the composite index has grown by almost 27% as the worst-case scenario from tariffs abated.
The financial companies’ index, with the biggest 32% weight on the overall main index, ended up 1.1%. Oil and gas shares, which have a weight of more than 16% and the second-biggest share in the main index, also boosted the TSX after the energy index closed up 1.51%. Oil prices settled higher on Wednesday after data showed a larger-than-expected drop in U.S. crude inventories and as investors weighed the potential impact from new U.S. tariffs on India.
However, some fund managers are not enthused by the upswing in the Canadian market, as a failure of Prime Minister Mark Carney’s government to secure a trade deal with the U.S. has added to the threat of tariffs and uncertainty.
“I think we’re a long way away from nailing down a deal that’s going to be widely accepted as great,” said Michael Sprung, president of Sprung Investment Management.
He said while strong earnings are driving positive sentiments and buying activity, the market is at risk of overheating based on the current exuberance of investors.
On Wall Street, the S&P 500 notched a record high close ahead of quarterly results from Nvidia. The company beat estimates on both the top and bottom line when released in the post market, but still left investors a bit disappointed, and shares were down marginally in extended trading.
Enthusiasm for companies related to AI has fueled big gains in technology stocks. The S&P 500 now trades at over 22 times expected earnings, its highest price-to-earnings ratio in four years, according to LSEG.
Concerns about the pace of the AI rally increased last week after OpenAI CEO Sam Altman warned of a potential AI bubble.
The S&P 500 climbed 0.24% to end the session at 6,481.40 points, exceeding its previous record high close on August 14.
The Nasdaq gained 0.21% to 21,590.14 points, while the Dow Jones Industrial Average rose 0.32% to 45,565.23 points.
Eight of the 11 S&P 500 sector indexes rose, led by energy, up 1.15%, followed by a 0.48% gain in information technology.
Investors were also watching for developments related to U.S. President Donald Trump’s attempt to fire Federal Reserve Governor Lisa Cook, a move likely to face legal challenges.
If Trump succeeds, he would nominate a replacement to the central bank’s board who could be expected to back his policy preferences, challenging the central bank’s independence.
Investors are pricing in a 25-basis-point interest-rate cut in September, according to data compiled by LSEG, with most big brokerages also leaning in that direction.
New York Federal Reserve Bank President John Williams said on CNBC it is likely interest rates can fall at some point but policymakers need to see upcoming economic data to decide if a rate cut is appropriate at the Fed’s September meeting.
MongoDB soared 38% after the software-maker raised its annual profit forecast.
J.M. Smucker fell 4.4% after the Jif peanut butter maker missed first-quarter profit estimates.
Advancing issues outnumbered falling ones within the S&P 500 by a 2.2-to-one ratio.
The S&P 500 posted 28 new highs and 1 new lows; the Nasdaq recorded 127 new highs and 35 new lows.
Volume on U.S. exchanges was relatively light, with 14.0 billion shares traded, compared to an average of 16.9 billion shares over the previous 20 sessions.
Reuters, Globe staff