Canada’s main stock index closed up on Tuesday as strong bank earnings and higher gold prices helped boost shares, even as oil prices slid and concerns deepened about the U.S. Federal Reserve’s independence. Wall Street also ended higher.
The S&P/TSX composite index was up 0.6% to 28,339.88 points, mostly led by strong earnings from two of the country’s five biggest lenders. Bank of Montreal and Bank of Nova Scotia kicked off big bank earnings for the quarter that ended on July 31, with profits and commentary cheered by markets and analysts.
BMO and Scotiabank beat third-quarter earnings estimates and reported smaller-than-expected loan loss provisions. BMO and Scotiabank shares were up nearly 5% and 7%, respectively, at market close, pushing the financial index, with a 32% weighting in the composite index, up 1.4% on close.
“With all the talk about tariffs and slowing growth in Canada, it’s actually quite positive to see the banks reporting earnings that were better than expected,” said Elvis Picardo, a portfolio manager at Luft Financial, iA Private Wealth. “It just proves that the Canadian economy is still resilient.”
The index also benefited from gold prices, which rose to a more than two-week high as investors took refuge in safe-haven yellow metal after fears that U.S. President Donald Trump would infringe on the independence of the Federal Reserve.
Trump fired Fed Governor Lisa Cook over alleged improprieties in obtaining mortgage loans. Spot gold was trading at 3,390.52 per ounce, up 0.71% at 4:13 p.m. ET, which lifted the mining-companies-tracker materials index, with almost 12.5% weight on the TSX, up 1.41% at market close.
“The financial market community is increasingly concerned about that independence. That is a real concern over the long run. But over the short run, how much does it change the trajectory of interest rate policy in the next six to 12 months? I think the writing has already been on the wall that we get easier monetary policy in the next six to 12 months,” said Bill Merz, head of Capital Market Research at U.S. Bank Wealth Management, Minneapolis.
Despite lingering inflation pressures, traders have been pricing in a 25-basis-point interest rate cut for the Fed’s September policy meeting, encouraged by dovish signals from Fed Chair Jerome Powell, data pointing to labor market weakness and a shakeup at the central bank.
Morgan Stanley became the latest brokerage to forecast an interest-rate cut in September, but key upcoming inflation and jobs reports could prompt investors to reassess expectations.
The U.S. two-year Treasury yield, which closely tracks expectations for Fed action, slipped to 3.68% from 3.73% late Monday.
Nvidia rose 1.1% ahead of its quarterly report late Wednesday, which will show how the world’s most valuable company is faring in the crossfire of Washington and Beijing’s ongoing trade war. The chipmaker’s report could also fuel - or dampen - Wall Street’s rally in AI-related stocks.
Among stocks, Eli Lilly jumped almost 6% after the drugmaker said its experimental pill cuts body weight by 10.5% in diabetes patients.
The S&P 500 is trading at about 23 times expected earnings, a four-year high, heightening the risk of a selloff if Nvidia’s results dent Wall Street’s enthusiasm for AI-related stocks.
The S&P 500 climbed 0.41% to end the session at 6,465.94 points, just short of its August 14 record-high close. The Nasdaq gained 0.44% to 21,544.27 points, while the Dow Jones Industrial Average rose 0.30% to 45,418.07 points. Seven of the 11 S&P 500 sector indexes rose, led by industrials, up 1.03%, followed by a 0.76% gain in financials.
Advanced Micro Devices gained 2% after Truist Securities upgraded the chip stock to “buy” from “hold.” EchoStar surged 70% to a record high after telecom giant AT&T said it has agreed to buy certain wireless spectrum licenses from the satellite communications firm for about $23 billion.
Advancing issues outnumbered falling ones within the S&P 500 by a 1.1-to-one ratio. The S&P 500 posted 21 new highs and 2 new lows; the Nasdaq recorded 120 new highs and 59 new lows. Volume on U.S. exchanges was relatively light, with 15.7 billion shares traded, compared with an average of 16.9 billion shares over the previous 20 sessions.
Reuters, The Associated Press, Globe staff