Wall Street extended its rally on Tuesday as a spate of economic data appeared to support the case for the U.S. Federal Reserve to implement its third and final rate cut of the year in December, while softness in the tech sector limited the Nasdaq’s gains. The TSX moved broadly in line with the S&P 500, and eclipsed its Nov. 12 record closing high.
All three major U.S. stock indexes closed in positive territory, with the blue-chip Dow out front. But sagging shares of artificial intelligence frontrunner Nvidia limited the Nasdaq’s advance.
Nvidia dipped 2.6%, while the Philadelphia SE Semiconductor index eked out a 0.2% gain. An influx of economic data was released, much of it supporting views that the Federal Open Market Committee will reduce its key Fed funds target rate by 25 basis points at its upcoming monetary policy meeting, but official reports were stale due to delays related to the recent protracted government shutdown.
The Commerce and Labor departments issued September reports on retail sales and producer prices, respectively, which showed spending softened and that inflation continued to cool.
More recent data from the Conference Board showed a worse-than-expected deterioration of consumer confidence, with near-term expectations tumbling nearly 12%.
“At the last Fed meeting, (Fed Chair Jerome) Powell pretty much said (the Fed) would be on hold” at its next meeting due to a lack of economic data, said Paul Nolte, market strategist at Murphy & Sylvest in Elmhurst, Illinois. “Then we had Fed governors speaking and we’ve gone from ‘we’re not going to do anything in December’ to ‘we need to cut in December because we’re seeing some serious weakening in the job market.’”
Financial markets agree, and are currently pricing in an 84.7% likelihood of that happening, compared with 50.1% a week ago. That probability has gained strength in recent days following dovish remarks by New York Fed President John Williams and Fed Governor Christopher Waller, among others. U.S. Treasury Secretary Scott Bessent said there was a good chance U.S. President Donald Trump will name his pick for Powell’s successor before Christmas, with White House economic adviser Kevin Hassett widely seen as a likely frontrunner.
“We have an idea who the next Fed chair might be and he’s on the dovish side,” Nolte added. “So I think the markets are feeling pretty good that interest rates are on the way down throughout 2026.”
The Dow Jones Industrial Average rose 664.18 points, or 1.43%, to 47,112.45, the S&P 500 gained 60.77 points, or 0.91%, to 6,765.89 and the Nasdaq Composite gained 153.59 points, or 0.67%, to 23,025.59.
The S&P/TSX composite index ended up 296.30 points, or 1%, at 30,900.65.
“I can understand why the markets are excited,” said Barry Schwartz, chief investment officer at Baskin Wealth Management. “We seem to be in a much more calm political environment at the moment ... and now the focus is on infrastructure. Big plans in both Canada and the U.S.”
Canadian Prime Minister Mark Carney has committed to invest about C$280 billion over five years in infrastructure as well as on measures to raise productivity and competitiveness.
“We’re getting the sense that 2026 is setting up to be a terrific year for the North American economy as well as corporate profits,” Schwartz said.
The TSX consumer staples and consumer discretionary sectors added 2.6% and 2.2% respectively. Shares of convenience store operator Alimentation Couche-Tard were up 4.9% after the company beat quarterly profit estimates. Financials added 1.1% and industrials ended 1.6% higher.
Energy was the only one of 10 major sectors to end lower, losing 0.6%. The price of oil settled 1.5% lower at US$57.95 a barrel as Ukraine hinted that an intense diplomatic push by the U.S. administration to end Russia’s war against it could be making progress.
The TMX Group, which operates the Toronto Stock Exchange, is expecting a big pickup in stock market listings heading into 2026, boosted by a robust pipeline of companies that are aiming to tap the capital markets in the coming months, executives at the firm told Reuters. Shares of TMX were down 0.9%.
On Wall Street, among the 11 major sectors in the S&P 500, health care led the gainers, while energy shares suffered the steepest percentage decline.
While softer-than-expected retail sales data and the dour consumer confidence reading raised concerns over the health of the consumer, a smattering of generally positive retail earnings helped send the S&P 500 retail index up 2.0%. Department store chain Kohl’s jumped 42.5% and clothing retailer Abercrombie & Fitch surged 37.5%, after the companies hiked their annual earnings forecasts.
But Burlington Stores tumbled 12.2% after third-quarter revenue missed estimates. Alphabet’s shares rose 1.5% after the Information reported Meta Platforms was in discussions to use Google’s AI chips in its data centers from 2027 and rent chips from Google Cloud by next year. Meta Platforms added 3.8%. U.S.-listed shares of Alibaba slipped 2.3% even after the Chinese e-commerce firm beat quarterly revenue expectations.
Advancing issues outnumbered decliners by a 4.05-to-1 ratio on the NYSE. There were 181 new highs and 45 new lows on the NYSE. On the Nasdaq, 3,355 stocks rose and 1,296 fell as advancing issues outnumbered decliners by a 2.59-to-1 ratio. The S&P 500 posted 40 new 52-week highs and 2 new lows while the Nasdaq Composite recorded 140 new highs and 80 new lows.
Volume on U.S. exchanges was 16.68 billion shares, compared with the 19.78 billion average for the full session over the last 20 trading days.
Reuters, Globe staff