Canada’s main stock index rose on Thursday to its highest closing level in more than one week, lifted by gains for interest rate-sensitive financial stocks as investors weighed aggressive monetary policy tightening by global central banks.
The Toronto Stock Exchange’s S&P/TSX composite index ended up 171.56 points, or 0.9%, at 19,413.00, its highest closing level since Aug. 30.
Wall Street’s main indexes also posted gains as hawkish remarks from Federal Reserve Chair Jerome Powell cemented bets of a large interest rate hike by the U.S. central bank later this month. Powell said the central bank is “strongly committed” to bringing inflation down and needs to keep going until it gets the job done.
Chicago Fed President Charles Evans, meanwhile, joined his fellow policymakers in saying that reining in inflation is “job one.”
“Everyone’s waiting for when the Fed is going to back off from some of their aggressive policies and Powell has made it clear that he’s not going to make that pivot anytime soon,” said Greg Taylor, portfolio manager at Purpose Investments.
Meanwhile, the European Central Bank raised its benchmark lending rate by 75 basis points on Thursday, mirroring a similar increase by the Bank of Canada a day earlier.
A senior Bank of Canada official left the door open on Thursday to another oversized interest rate increase, saying the central bank continues to see front-loading as the best way to battle the fastest rising prices in nearly four decades.
The heavily weighted financials sector in Toronto gained 1.6%, while the materials group, which includes precious and base metals miners and fertilizer companies, added 1.5%.
Energy rose 0.9% as oil prices clawed back some recent declines. U.S. crude oil futures settled nearly 2% higher at $83.54 a barrel.
Canada’s employment report for August, due on Friday, could offer clues on the strength of the domestic economy.
Wall Street’s main indexes were also lifted Thursday mainly by financial institutions, as well as health-care companies.
Indexes bounced back and forth in a choppy trading as concerns over Federal Reserve’s next steps to tame a surging inflation remain.
“There’s just a lot of uncertainty and I think people aren’t going to really make up their minds for longer than five minutes or five seconds, you know, until there’s a little bit more clarity or light at the end of the tunnel,” said Grace Lee, an equity income senior portfolio manager at Boston-based Columbia Threadneedle Investments.
Money market traders see 87% odds that the Fed will hike rates by 75 basis points at this month’s meeting.
Bank of America, Barclays and Jefferies said they now see a 75-basis points interest rate hike. Before Barclays had said it could be a 50- or 75-basis point increase, while Bank of America and Jefferies were betting on a 50-basis point rise.
Investors are also awaiting the U.S. August inflation report next week for fresh clues on whether the Federal Reserve will hike rates by half or three-quarters of a percentage point at the next policy meeting due Sept. 20-21.
Data Thursday showed the number of Americans filing new claims for unemployment benefits fell last week to a three-month low, underscoring the robustness of the labor market even as the Fed raises interest rates.
With increasing odds of another outsized rate hike, both the rate-sensitive S&P 500 bank index and the S&P 500 health-care sector rose 2.8% and 1.8%, respectively.
The health-care sector was boosted by news that Regeneron Pharmaceuticals Inc’s anti-blindness treatment Eylea was shown to work as well when given at a higher dose at a longer interval between injections. The drugmaker’s shares jumped 18.8%.
“People are embracing safety. Healthcare is a very safe sector and it’s still fairly cheap, the same way with the broader financial sector,” said Lee.
The Dow Jones Industrial Average rose 193.24 points, or 0.61%, to 31,774.52, the S&P 500 gained 26.31 points, or 0.66%, to 4,006.18 and the Nasdaq Composite added 70.23 points, or 0.6%, to 11,862.13.
GameStop Corp surged 7.4% after the video game retailer reported a smaller-than-expected quarterly loss.
American Eagle Outfitters Inc tumbled 8.7% after the apparel maker missed second-quarter profit estimates and said it would pause quarterly dividend as it fortifies its finances against a hit from inflation.
Volume on U.S. exchanges was 10.19 billion shares, compared with the 10.37 billion average for the full session over the last 20 trading days.
On Wednesday, Wall Street’s main indexes climbed the most in about a month as bond yields retreated after a recent surge that was driven by expectations of higher interest rates. Still, the benchmark S&P 500 is down over 16% year-to-date.
Advancing issues outnumbered declining ones on the NYSE by a 1.34-to-1 ratio; on Nasdaq, a 1.48-to-1 ratio favored advancers. The S&P 500 posted 7 new 52-week highs and 8 new lows; the Nasdaq Composite recorded 37 new highs and 153 new lows.
Reuters, Globe staff
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