U.S. and Canadian stocks rallied on Wednesday after the Federal Reserve kept rates unchanged as widely expected and indicated that two quarter-point interest-rate cuts were still likely later this year despite growing concerns about tariffs sending inflation higher. It was the S&P/TSX Composite Index’s biggest advance since Aug. 8.
The central bank kept its benchmark overnight interest rate unchanged in the 4.25%-4.50% range. The Fed also forecast slower economic growth and higher inflation.
Policymakers disagreed about the path forward, pointing to uncertainty among members about how to handle the effects of Trump’s plans. The Fed also said it would reduce the pace of the drawdown of its still-massive balance sheet, as it faces challenges in assessing market liquidity during an ongoing impasse in the U.S. Congress over lifting the government’s borrowing limit.
Stocks extended gains further as Fed Chair Jerome Powell spoke, saying it was too early to determine whether to look through the impact U.S. tariffs would have on inflation, and difficult to assess how much of any price increases are attributable to the levies.
“The market was primarily looking for anything that reduced the uncertainty, and I think simply that Powell was kind of maintaining the outlook there,” said Russell Price, chief economist at Ameriprise Financial in Troy, Michigan. “Inflation expectations went up just a little bit, and their GDP numbers came down just a little bit, so the market’s taking it as the Fed did not add to the overall uncertainty background that is currently pressuring stocks.”
Traders still see the Fed lowering borrowing costs by at least two 25-basis point cuts by December, with a 62.2% chance for a cut of at least 25 basis points in June, according to data compiled by LSEG.
The TSX ended up 363.14 points, or 1.47%, at 25,069.21, its highest closing level since Feb. 28.
The Dow Jones Industrial Average rose 383.32 points, or 0.92%, to 41,964.63, the S&P 500 gained 60.63 points, or 1.08%, to 5,675.29 and the Nasdaq Composite gained 246.67 points, or 1.41%, to 17,750.79.
Stocks have come under selling pressure in recent weeks after a string of economic indicators signaled the U.S. economy and consumer sentiment may be cooling as trade policy concerns grow. Still, equities have shown signs of bottoming by registering gains in three of the past four sessions.
Multiple companies have also lowered their profit outlooks, the latest being General Mills. The Pillsbury owner lowered its annual sales outlook, sending its shares 2.05% lower.
In Toronto, technology was the biggest gainer among sectors, adding 3%, boosted by a 8.3% jump in the shares of e-commerce company Shopify Inc.
Energy was up 1.7% as the price of oil settled 0.4% higher at US$67.16 a barrel. Heavily weighed financials rose 1.2% and consumer staples ended 2.5% higher.
Shares of retailer Alimentation Couche-Tard climbed 6.3% after the company reported quarterly results. Its CEO said a no non-disclosure agreement had been signed over potential stores needed to be sold by the Canadian company and Japan’s Seven & i to meet U.S. antitrust conditions for a deal.
The materials group ended 0.9% higher as copper prices climbed and gold moved to a fresh record high.
Health care was the only one of 10 major sectors to end lower, losing 1%.
Among U.S. stocks, Boeing shares jumped 6.84% after the aircraft maker said it does not see a near-term impact from tariffs.
Each of 11 S&P 500 sectors rose, led by a nearly 2% gain in consumer discretionary stocks.
The benchmark S&P 500 index confirmed last week it was in correction following a 10% drop from its recent high. The tech-heavy Nasdaq also confirmed a correction on March 6.
Advancing issues outnumbered decliners for a 2.92-to-1 ratio on the NYSE and a 2.4-to-1 ratio on the Nasdaq. The S&P 500 posted seven new 52-week highs and one new low, while the Nasdaq Composite recorded 33 new highs and 114 new lows. Volume on U.S. exchanges was 13.53 billion shares, compared with the 16.34 billion average for the full session over the last 20 trading days.
The yield on benchmark U.S. 10-year notes fell 3.3 basis points to 4.249%, from 4.281% late on Tuesday.
Reuters, Globe staff