Canada’s main stock index rebounded on Friday, led by gains for Magna and commodity-linked shares, as softer-than-expected U.S. inflation data raised prospects of Federal Reserve interest rate cuts.
The S&P/TSX composite index ended up 608.43 points, or 1.9%, at 33,073.71, recouping much of the previous day’s sharp decline. For the week, the index added 1.9%.
U.S. consumer prices increased less than expected in January amid cheaper gasoline and a moderation in rental inflation.
“If inflation continues to trend lower over the next few months it makes a strong case for a June cut,” said Ian Chong, a portfolio manager at First Avenue Investment Counsel Inc. “You are seeing a lot of these rate-sensitive sectors outperform today.”
The Canadian 10-year yield touched a two-month low of 3.234%.
“The markets have been beaten up the last couple of days, so perhaps we’re getting a reprieve from this whole AI disruption, risk-off sentiment and dip buyers are reentering the market,” Chong said.
The materials group, which includes metal mining shares, jumped 4.4% as the price of gold moved back above $5,000 per ounce on Fed rate-cut hopes.
Energy also posted gains, rising 1.8%. The price of oil settled 0.1% higher at $62.89 as the U.S. data offset supply concerns.
Pipeline operator Enbridge Inc beat expectations for fourth-quarter profit and said it had sanctioned several projects to help meet surging demand for power across North America. Its shares were up 3.8%.
Magna International shares soared 18.9% after the company forecast a strong annual profit, helped by cost-saving measures and steady demand for its auto parts.
Consumer discretionary was up 4% and technology ended 1.8% higher.
Wall Street
The S&P 500 closed barely higher, supported by the cooling inflation data, but the Nasdaq ended lower as heavyweight technology and communications services shares lost ground on nagging fears of disruption by artificial intelligence.
The S&P 500, the Nasdaq and the Dow all declined for the week with technology stocks on a roller-coaster ride due to uncertainty about the extent to which profits could be disrupted due to AI competition and the hefty spending needed to support the technology.
“Large cap tech stocks continue to be an anchor on the market and any whiff of optimism continues to get rejected,” said Michael James, managing director, at Rosenblatt Securities, Los Angeles.
“We’ve been on wobbly legs a couple of weeks now and with the three-day weekend approaching, it’s not surprising to roll over into the end of the day.”
The Dow Jones Industrial Average rose 48.95 points, or 0.10%, to 49,500.93, the S&P 500 gained 3.41 points, or 0.05%, to 6,836.17 and the Nasdaq Composite lost 50.48 points, or 0.22%, to 22,546.67.
For the week, the S&P 500 fell 1.39%, the Nasdaq declined 2.1%, and the Dow fell 1.23% for their biggest weekly losses since November. Equity markets have pulled back from record levels recently as AI fears fueled worries in sectors spanning from software and insurance to trucking companies. However, the S&P 500 software and services index closed up 0.9% on Friday while the S&P 500 tech sector fell 0.5%.
Despite improving inflation trends, Phil Orlando, chief market strategist at Federated Hermes, predicted more choppy trading ahead as investors deal with the looming U.S. midterm elections in November and the expected replacement of Fed Chair Jerome Powell by Kevin Warsh in May.
Historically when a Fed leadership transition happens in a midterm year, the market has hit a “double-digit air-pocket every time that’s occurred,” Orlando said.
Megacap tech stocks were weak with Nvidia and Apple Inc providing the biggest drags to the S&P 500 while Applied Materials provided the strongest boost.
Defensive utilities ended up 2.69% and real estate added 1.48%, making them the top gainers among S&P 500’s 11 major industry indexes. Healthcare was also a boost with Dexcom rising 7.6% and Moderna rising 5.3% after both companies’ fourth-quarter earnings reports impressed.
Applied Materials shares jumped 8.1% after the chipmaking-equipment firm forecast second-quarter revenue and profit above Wall Street expectations. Networking equipment provider Arista Networks gained 4.8% during the session after forecasting annual revenue above expectations.
White House trade adviser Peter Navarro said there was no basis to reports that the administration was planning to reduce steel and aluminum tariffs.
Still, some steelmakers came under pressure with Nucor falling just under 3% and Steel Dynamics slipping 3.9%. Also aluminum producer Alcoa fell 0.9% while Century Aluminum shares tumbled 7.4%.
Advancing issues outnumbered decliners by a 2.57-to-1 ratio on the NYSE where there were 392 new highs and 93 new lows. On the Nasdaq, 3,156 stocks rose and 1,646 fell as advancing issues outnumbered decliners by a 1.92-to-1 ratio.
The S&P 500 posted 34 new 52-week highs and 6 new lows.
On U.S. exchanges 18.61 billion shares changed hands compared with the 20.75 billion moving average for the last 20 sessions.
Reuters, Globe staff