U.S. stock indexes rebounded on Tuesday from a recent losing streak as upbeat economic data soothed investor worries about an imminent recession triggered by the Federal Reserve’s aggressive interest rate hikes. The Canadian benchmark stock index also rose, helped by gains for technology and consumer discretionary shares as domestic data showed inflation pressures easing.
Separate reports showed new orders for key U.S.-manufactured capital goods unexpectedly rose in May, and sales of new single-family homes surged in the same month, while U.S. consumer confidence increased to a near 1-1/2 year high in June.
While the economic data was encouraging, Rhys Williams, chief strategist at Spouting Rock Asset Management, said the market also rose on seasonal factors.
“You’d a bad week in the stock market last week and a bad day on Monday. It’s just a bit of recovery,” said Williams. “There could be some quarter-end window-dressing too as we get close to the end of the quarter.”
The blue-chip Dow Jones Industrial Average snapped a six-day losing streak on Tuesday while the tech-heavy Nasdaq Composite was eyeing its best first-half performance in 40 years and the S&P 500 advanced after falling in five of the last six sessions.
In Toronto, the S&P/TSX Composite Index ended up 145.77 points, or 0.7%, at 19,733.09, adding to its gains on Monday. On Friday, the TSX posted its lowest close since mid-March.
Canada’s annual inflation rate came in at 3.4% in May, its slowest pace in two years, weakening the case for another interest rate hike as soon as next month by the Bank of Canada. Still, credit markets are pricing in 60% odds of another quarter-point hike in the bank’s trend-setting interest rate in July.
The TSX technology sector advanced 1.6%, tracking gains for U.S. tech shares, while consumer discretionary was up 1.8%.
Shares of Brookfield Corp rose 2.7% as its reinsurance arm offered to buy U.S. annuities provider American Equity Investment Life Holding in a deal worth nearly $4.3 billion.
The Toronto market is on track to post a quarterly decline, following two straight quarters of gains as an uncertain outlook for the global economy pressures commodity prices. Resource shares account for about 30% of the TSX’s market capitalization.
On Tuesday, the TSX energy index fell 0.3% as oil settled 2.4% lower at US$67.70 a barrel.
“It’s going to take a lot to change the minds of energy traders,” Edward Moya, senior market analyst at OANDA, said in a note. “Fears of a weaker global growth outlook are not going away anytime soon.”
The Dow Jones Industrial Average rose 212.03 points, or 0.63%, to 33,926.74; the S&P 500 gained 49.59 points, or 1.15%, at 4,378.41; and the Nasdaq Composite added 219.90 points, or 1.65%, at 13,555.67.
The signs of U.S. economic resilience also boosted the Dow Transports index, which closed up 2.7% and the small-cap Russell 2000 index, which advanced 1.5%.
And the PHLX Housing index closed up 2.99% after hitting an all-time high on Tuesday.
Traders were pricing in a roughly 77% chance the Fed will raise interest rates by 25 bps to the 5.25%-5.50% range in its July meeting, according to CME Group’s Fedwatch tool, up from 74.4% a day earlier.
More economic data is expected this week, including a key inflation measure, as well as Fed Chair Jerome Powell’s speech at the European Central Bank Forum in Sintra, Portugal, which could provide cues on the path of interest rates.
Powell’s hawkish comments last week stalled a U.S. stock rally that had pushed the S&P 500 and Nasdaq to an over one-year high and the Dow to a six-month peak.
Despite recent market weakness, a growth stocks rally, an upbeat earnings season and hopes of the Fed ending its monetary tightening soon have set the main U.S. indexes on course for quarterly gains.
Market heavyweights Microsoft Corp and Apple Inc were among the biggest boosts to the S&P 500 during the session, along with Amazon.com Inc, Tesla Inc and Nvidia Corp.
Meta Platforms Inc shares rose 3% after Citigroup raised its price target on the stock.
Snowflake climbed 4.2% after the cloud data analytics company announced a partnership with Nvidia to allow customers to build artificial intelligence models using their own data.
Walgreens Boots Alliance shares sank 9.3% as the pharmacy chain cut its annual profit forecast on lower demand for COVID-19 tests and vaccines.
Other drugstore chains, including CVS Health Corp and Rite Aid Corp, also fell.
Lordstown Motors Corp shares slumped 17.2% after the U.S. electric truck manufacturer filed for bankruptcy protection and put itself up for sale.
Advancing issues outnumbered decliners on the NYSE by a 2.55-to-1 ratio; on Nasdaq, a 1.54-to-1 ratio favored advancers. The S&P 500 posted 46 new 52-week highs and one new low; the Nasdaq Composite recorded 64 new highs and 150 new lows. On U.S. exchanges 10.16 billion shares changed hands compared with the 11.63 billion average for the last 20 sessions.
Reuters, Globe staff
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