Global stocks held close to record highs while U.S. Treasury yields and the greenback firmed on Thursday as the debate continued over when the Federal Reserve will start to ease stimulus.
Data on Wednesday hinted that U.S. inflation may have peaked, reassuring investors that the Federal Reserve will not feel obligated to hasten plans to rein in emergency-level support of the economy.
However, producer prices on Thursday showed their largest increase in more than a decade.
Overall, investors believed the possibility of near-term tapering was receding.
Canada’s main stock index retreated from a record high on Thursday, as major gold miners weighed the most while energy shares were pulled down by concerns over slow demand recovery in the global crude market.
The Toronto Stock Exchange’s S&P/TSX composite index closed down 33.41 points, or 0.16%, at 20,463.85.
The materials sector, which includes precious and base metals miners and fertilizer companies, lost 0.8% as gold prices retreated from recent gains made on signs of slowing U.S. consumer inflation.
The energy sector dipped 0.7% as oil prices fell on Thursday after the International Energy Agency (IEA) said the spread of the Delta variant of the coronavirus would slow the recovery of global oil demand.
The Canadian dollar edged lower against its U.S. counterpart on Thursday, as data suggesting U.S. inflation pressures remain strong raised pressure on the Federal Reserve to reduce economic stimulus and investors braced for a Canadian federal election.
The U.S. dollar advanced against a basket of currencies after data showed producer prices posting their largest annual increase in more than a decade in July.
Investors remain vigilant for any signs of inflation running too hot since it could spur the Fed to pull forward the tapering of asset purchases.
“Fed policy, I think that’s the key driver right now,” said Marc Chandler, chief market strategist at Bannockburn Global Forex LLC. “People are thinking that the Fed is more hawkish.”
Adding to pressure on the loonie, the price of oil, one of Canada’s major exports, settled 0.2% lower at $69.09 a barrel, after the International Energy Agency said the spread of the Delta variant of the coronavirus would slow the recovery of global oil demand.
The Canadian dollar was trading 0.2% lower at 1.2525 to the greenback, or 79.84 U.S. cents, after trading in a range of 1.2500 to 1.2533.
Canadian Prime Minister Justin Trudeau is planning to call a snap election for Sept. 20, Reuters reported. Investors are looking for signs that Canada’s next government could dial back historic levels of fiscal spending to support the economy during the pandemic, with activity already on track to make a full recovery.
“I think (Canadian) policymakers, both the government and the central bank are more confident in the recovery, especially given the strength of the U.S. economy,” Chandler said.
The Dow and S&P 500 jumped to record closes for a third straight day on Thursday, with mega-cap technology stocks driving the market higher as investors warmed to jobs data showing a steady U.S. economic recovery.
Apple Inc, Microsoft Corp, Amazon.com , Google parent Alphabet Inc and Facebook Inc , which account for a quarter of the S&P 500′s market capitalization, led shares on the S&P and tech-heavy Nasdaq.
Tesla Inc, Nvidia Corp and Moderna Inc also rallied on a day in which more stocks declined than advanced.
“Today the S&P 500 reached another all-time high, and is at an all-time high for good reasons,” said Terry Sandven, chief equity strategist at U.S. Bank Wealth Management in Minneapolis.
The fundamental backdrop is supportive of higher equity prices, Sandven said. Earnings are trending higher, interest rates are low and inflation remains moderate, he said.
Unofficially, the Dow Jones Industrial Average rose 14.74 points, or 0.04%, to 35,499.71, the S&P 500 gained 13.12 points, or 0.29%, to 4,460.82 and the Nasdaq Composite added 51.13 points, or 0.35%, to 14,816.26.
Traders snapped up big tech shares that had missed out on the overall market marching higher the past week, according to Tim Ghriskey, chief investment strategist at Inverness Counsel.
“The move into big tech is simply a trading opportunity. Big tech has been down for a week or so, underperforming the market pretty significantly,” Ghriskey said. “There are bargain hunters coming in, jumping on those securities.”
Apple added the most to the S&P, followed by Microsoft, Amazon.com and Tesla. Growth stocks outpaced value shares, reversing a recent trend.
Healthcare and technology were the best- performing S&P 500 sectors. Energy weighed the most and pulled the Dow from record highs it set on Wednesday as a multitrillion dollar infrastructure bill moved through Congress.
Data on Thursday showed U.S. producer prices posted their largest annual increase in more than a decade last month, raising inflation concerns, after Wednesday’s U.S. consumer price index reading indicated the pace appeared to be slowing.
The data reflect well-known supply chain challenges that will not change Federal Reserve policy, said Mike Loewengart, managing director of investment strategy at E*TRADE Financial.
“Everyone is expecting potentially tapering to begin in September,” he said. “But for the most part, it would not change the conducive environment that we are currently in, for additional gains in equity markets.”
Trading volume has slumped, typical of August, as a stellar second-quarter earnings season winds down. Investors are now waiting for the Fed’s annual meeting in Jackson Hole, Wyoming, at month end for clues on its plans to tighten policy.
Micron Technology was one of the biggest weights on the S&P 500 after Morgan Stanley downgraded the stock to “equal-weight.”
In earnings-related moves, Baidu Inc’s U.S. shares slid even after the company posted upbeat quarterly revenue.
Palantir Technologies Inc jumped after the U.S. data analytics firm forecast third-quarter sales above expectations.
Earnings reports from Walt Disney Co, vacation home rental firm Airbnb Inc and food-delivery firm DoorDash Inc were due later in the day.
Reuters
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