Wall Street’s three main stock indexes closed higher on Wednesday for their biggest daily gains so far in December with help from upbeat Nike and FedEx quarterly earnings, as well as improving consumer confidence. The Canadian benchmark index also rallied in a broad advance, as higher oil prices boosted energy shares and investors took some encouragement from domestic data showing an easing in the annual rate of inflation.
Nike Inc shares soared 12% after beating profit expectations for its second quarter on strong holiday demand from North American shoppers, while FedEx finished up 3.4% and shares in cruise operator Carnival Corp jumped 4.7% after posting a smaller-than-expected quarterly loss.
FedEx Corp, which sparked a market selloff in September after pulling financial forecasts, provided financial guidance and announced plans for US$1 billion cost cuts.
Also, U.S. consumer confidence rose to an eight-month high in December as inflation retreated and the labour market remained strong while 12-month inflation expectations fell to 6.7%, the lowest since September 2021.
“We’re seeing a broad rally. It’s been helped by upbeat corporate commentary and an improvement in consumer confidence,” said Angelo Kourkafas, investment strategist at Edward Jones in St. Louis referring to Nike and FedEx.
Still, Wednesday’s data also showed that U.S. existing home sales slumped 7.7% to a 2-1/2-year low in November as the housing market was hurt by higher mortgage rates. But the data may be fueling investor hope that the Fed could ease up on its tightening policy.
“At the macro level you have economic weakness but at the micro level you have companies that are resilient and delivering positive expectations from an earnings perspective,” said Brian Price, head of investment management for Commonwealth Financial Network in Waltham, Mass. “That combination is going to be positive.”
Fears of a recession following the U.S. central bank’s prolonged interest rate hikes have weighed heavily on equities and these fears have put the S&P on track for its biggest annual decline since 2008 and a decline for December.
“There’s still a lot of uncertainty and we’re likely to see a lot of volatility early in the year as we could be in a mild recessionary environment,” said Edward Jones’ Kourkafas but he believes the market has already priced in a weaker economy.
“We still have some headwinds ahead but maybe we don’t have to price in a recession twice. So far what we’ve seen this year has already priced in a mild recession.”
The Toronto Stock Exchange’s S&P/TSX composite index ended up 264.21 points, or 1.4%, at 19,571.10, its biggest single-day increase since Nov. 10.
Canada’s annual inflation rate was 6.8% in November, a notch above analysts’ forecasts of 6.7%, but down from 6.9% in October.
“It is a touch higher than expected, but I still think it shows that it is a step down from the prior month and that is really the good news,” said Greg Taylor, a portfolio manager at Purpose Investments.
However, inflation is not going to be easy to stamp out, Taylor added.
Earlier this month, Bank of Canada Governor Tiff Macklem said the central bank was trying to raise interest rates enough to tame inflation without forcing the economy into a deep recession but the greater risk of the two is sticky inflation, which would require “much higher” rates.
All 10 major sectors of the TSX were in the green, with energy up 2.7% as oil settled 2.7% higher at $78.29 a barrel. The materials group, which include precious and base metal miners, ended 1.5% higher.
Commodity-fueled gains have helped the benchmark index outperform the U.S. S&P 500 index so far this year, losing 7.8% versus a drop of 18.6% for the U.S. benchmark.
Shares of BlackBerry Ltd were a drag in Toronto, falling 9.4% after the tech company said it expects the current macroeconomic environment to pose more near-term challenges.
On Wall Street, the Dow Jones Industrial Average rose 526.74 points, or 1.6%, to 33,376.48, the S&P 500 gained 56.82 points, or 1.49%, to 3,878.44 and the Nasdaq Composite added 162.26 points, or 1.54%, to 10,709.37.
Energy firms were the biggest gainers among the S&P’s 11 major industry sector, adding 1.89%, as oil futures rose.
The smallest gainer among the sectors was consumer staples which finished up 0.8%.
AMC Entertainment Holdings Inc finished up 4.3% after the cinema-chain operator said it suspended talks to acquire certain assets of bankrupt Cineworld Group.
Advancing issues outnumbered declining ones on the NYSE by a 3.43-to-1 ratio; on Nasdaq, a 2.10-to-1 ratio favored advancers. The S&P 500 posted 5 new 52-week highs and 3 new lows; the Nasdaq Composite recorded 69 new highs and 268 new lows. On U.S. exchanges 9.81 billion shares changed hands, compared with the 11.16 billion average for the last 20 sessions.
Reuters, Globe staff
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