Stocks rallied Thursday, as chip-maker Nvidia rose closer to a US$4 trillion valuation and a surprisingly strong U.S. jobs report cheered investors, who shrugged off dimming chances for a U.S. interest rate cut next month.
The S&P 500 and Nasdaq closed at record highs, notching a third week of gains. The Dow closed up 0.77%, near its own record. The S&P/TSX Composite Index rose 0.61%, closing above 27,000 for the first time.
Chipmaker Nvidia rose 1.3%, putting its market capitalization at US$3.89 trillion. The company is close to overtaking Apple and becoming the world’s most valuable company in history.
Trading volume on Wall Street was light in a shorter session on the eve of Friday’s U.S. Independence Day holiday.
“We are seeing a real bout of irrational exuberance; the stock market is very biased towards optimism,” said Kristina Hooper, Chief Market Strategist at Man Group in New York. “But there’s some basis for it. I think there is some level of relief because the jobs report was not as weak as it could have been.”
The rally has been fueled by retail investors, who are largely ignoring the inflationary pressure on the horizon, uncertainty around tariffs and “are focused on the tangible, which is today’s jobs report,” she said.
Data showed U.S. nonfarm payrolls increased by 147,000 jobs last month, 33% more than the 110,000 jobs forecasted by economists polled by Reuters. Unemployment fell to 4.1% last month, a better result than the 4.3% expected.
Traders quickly priced out chances of an interest-rate cut in July, with the odds of a 25-basis-point reduction in September at 68%, according to CME Group’s Fedwatch tool, down from 74% a week ago.
House Republicans propelled U.S. President Donald Trump’s big trillion tax breaks and spending cuts bill to final passage Thursday in Congress, overcoming multiple setbacks to approve his signature second-term policy package before a Fourth of July deadline.
The legislation is expected to add US$3.4 trillion to the nation’s US$36.2 trillion debt over the next decade, according to nonpartisan analysts.
Large tax cuts and increased government spending can boost demand in the economy. This can add inflationary pressure, especially when the economy shows signs of strength such as the latest job report.
“Some data points like the job report are positive and charming, but if we just take a step back, the picture is not that great,” said Alex Morris, CEO of F/m Investments, which manages US$18 billion in Washington, D.C.
“It’s kind of perplexing,” Morris said. “This feels like that last bull rush before all of the data really comes together.”
The S&P 500 gained 51.94 points, or 0.83%, to 6,279.36 and the Nasdaq Composite gained 207.97 points, or 1.02%, to 20,601.10. The Dow Jones Industrial Average rose 344.11 points, or 0.77%, to 44,828.53.
For the week, the S&P 500 gained 1.72%, the Nasdaq rose 1.62%, and the Dow climbed 2.3%. The Russell 2000 Small Cap index rose 3.41%.
The S&P/TSX composite index ended up 164.60 points at 27,034.26, eclipsing the record close on Wednesday. Year-to-date the index has gained 9.3%.
In domestic economic news Thursday, Canada’s trade deficit narrowed in May after reaching a record-breaking level in April, as exports rose and imports fell even as the impact of U.S. tariffs dented shipments south of the border.
Technology in Toronto rose 1.6%, with e-commerce company Shopify Inc adding 2.1%.
Heavily weighted financials were up 0.8% and consumer staples climbed 1.1%.
Cargojet Inc was a standout. Its shares rose 8.5% after the company extended its air transportation services agreement with Amazon.
Just two of the 10 major TSX sectors ended lower, including energy. Energy fell 0.4% as the price of oil settled 0.7% lower at US$67.00 a barrel.
In U.S. markets, Tripadvisor climbed 16.7% after the Wall Street Journal reported activist investor Starboard Value had built a more than 9% stake in the online travel company.
Datadog jumped 14.9% after the cloud security firm was set to replace Juniper Networks on the S&P 500.
Trading volume on U.S. exchanges was 10.85 billion shares, much lighter than the 17.82 billion average for the full session over the last 20 trading days.
Reuters, Globe staff