U.S. and Canadian stocks rebounded on Friday as investors neared the end of a holiday-shortened week that also rang in a new year, which brought with it expectations of additional Federal Reserve rate cuts and looser regulatory policies from the incoming Trump administration.
A broad rally sent all three major U.S. stock indexes to a higher close, with megacap growth companies, such as Tesla and Nvidia, providing much of the muscle to the upside and putting the tech-heavy Nasdaq out front. Even so, all three indexes posted modest declines for the week, with the S&P 500 logging its third weekly loss in four.
Tech stocks were also the biggest gainers on the TSX, with nine of the 10 major sectors all posting gains. The Canadian benchmark was higher for the week.
A multi-session selloff put a dour cap on what was a banner year for the equities market, as continued momentum of artificial intelligence technology and the U.S. Federal Reserve’s first policy rate cuts in three-and-a-half years helped fuel double-digit gains in 2024.
“After the late-in-the-year weakness, and a very oversold market, we finally saw some buyers step in,” said Ryan Detrick, chief market strategist at Carson Group in Omaha. “Obviously the past week-and-a-half has been disappointing for the bulls, but volume has been light and there hasn’t been a lot of news.”
“Let’s just remember, starting next week, on Monday, that’s when a lot of the big money managers come back to the desk,” Detrick added. “We’ll see if this bullish trend can continue.”
On the U.S. economic front, the Institute for Supply Management’s (ISM) purchasing managers’ index (PMI) surprised to the upside by gaining 0.9 point to 49.3, its highest reading since March, nudging ever closer to expansion territory.
A run of fairly robust economic data has called into question the need for additional interest rate cuts from the Fed in the near term due to the possibility of re-igniting inflationary pressures.
Richmond Fed President Thomas Barkin said the U.S. 2025 economic outlook was positive, despite uncertainty about the impact of trade and other policies that may be pursued by the incoming Trump administration.
The newly elected Congress convened for its first session on Friday, and U.S. President-elect Donald Trump is expected to take the oath of office on Jan. 20.
While Trump’s proposals - which include cutting corporate taxes, easing regulations and imposing tariffs - could boost corporate profits and energize the economy, they also run the risk of placing upward pressure on inflation.
The Dow Jones Industrial Average rose 339.86 points, or 0.80%, to 42,732.13, the S&P 500 gained 73.92 points, or 1.26%, to 5,942.47 and the Nasdaq Composite gained 340.88 points, or 1.77%, to 19,621.68.
The S&P/TSX composite index ended up 175.51 points or 0.7% at 25,073.54. For the week, the index added 1.1%, its second straight weekly gain.
The TSX gained nearly 18% in 2024, its biggest yearly advance since 2021. But it was down 3.6% in December as a hawkish shift by the Federal Reserve rattled investors.
The Toronto market’s technology sector climbed 1.2%, helped by a gain of 4.2% for the shares of electronics firm Celestica.
Heavily weighted financials rose 0.7%, industrials were up 0.8%, while energy added 0.6% as the price of oil climbed 1.2% to US$74.00 per barrel.
Healthcare was the only sector not to end higher, posting a very slight decline.
All 11 major sectors in the S&P 500 closed higher, with consumer discretionary stocks enjoying the largest percentage gain after Thursday’s rout.
With fourth-quarter earnings season still several weeks away, analysts see S&P 500 earnings growth, in aggregate, of 9.6% year-on-year, according to LSEG data.
U.S. President Joe Biden blocked the proposed sale of U.S. Steel to Japan’s Nippon Steel for US$14.9 billion, citing national security concerns. U.S. Steel’s shares dropped 6.5%.
Microsoft shares gained 1.1% after the company said it would invest $80 billion on AI-enabled data centers in fiscal 2025.
Alcohol producers lost some ground after U.S. Surgeon General Vivek Murthy said that alcoholic drinks should carry a label warning of cancer risks. Molson Coors and Brown Forman slid by 3.4% and 2.5%, respectively.
Advancing issues outnumbered decliners by a 3.03-to-1 ratio on the NYSE. There were 86 new highs and 89 new lows on the NYSE. On the Nasdaq, 3,179 stocks rose and 1,181 fell as advancing issues outnumbered decliners by a 2.69-to-1 ratio. The S&P 500 posted 2 new 52-week highs and 14 new lows while the Nasdaq Composite recorded 64 new highs and 30 new lows. Volume on U.S. exchanges was 14.09 billion shares, compared with the 14.91 billion average for the full session over the last 20 trading days.
Reuters, Globe staff