Canada’s main stock index rose on Wednesday as higher oil prices boosted energy shares and the major banks continued to beat earnings estimates.
The S&P/TSX Composite index ended up 111.26 points, or 0.4 per cent. It follows two consecutive days of losses for the index, retreating from a record closing high on Friday.
“Part of the reason we experienced a bit of a pullback was concerns around AI spend and the technology sector in the United States,” said Devin Cattelan, a portfolio manager at Verecan Capital Management. “The market is trying to digest and figure out what the actual payoff on the spend will be long-term and what the valuations are that would justify it.”
U.S. stocks also moved higher as a flurry of economic data kept expectations elevated for an interest rate cut by the Federal Reserve next week.
Canada’s stock market has a lower weighting than Wall Street in technology stocks that have spent heavily on AI but a relatively high exposure to metal mining shares.
“It’s going to require a lot of commodities and base metals to go into these infrastructure projects and these data center projects and so that’s been increasing the demand on the commodity side and it’s been a positive for the Toronto Stock Exchange,” Cattelan said.
The energy sector rose 2 per cent as the price of oil settled 0.5 per cent higher at $58.95 a barrel. The U.S. and Russia failed to reach a deal to end the war in Ukraine that could have eased sanctions on Moscow’s oil sector.
Gains for railroad shares helped lift the industrials sector. It added 1.2 per cent and technology ended 0.7 per cent higher.
Financials inched up 0.1 per cent, with shares of Royal Bank of Canada rising 1.1 per cent to a record high after the bank topped analysts’ estimates for fourth-quarter earnings. National Bank of Canada also reported earnings ahead of analysts’ estimates but its shares ended 1.6 per cent lower.
On Tuesday, Scotiabank was the first of the major banks to report earnings and it too beat estimates.
U.S. stocks advanced to close higher on Wednesday, as a flurry of economic data kept expectations elevated for an interest rate cut by the Federal Reserve next week, while a fall in Microsoft’s shares curbed the advance.
The record-long 43-day U.S. government shutdown kept investors in the dark about official data and hampered the ability to gauge the Fed’s likely path on interest rates. But the backlog is now being cleared along with data from non-governmental sources.
The Institute for Supply Management said U.S. services activity was little changed in November at 52.6 versus 52.4 in October while the prices paid component dipped but remained elevated. The reading comes ahead of the delayed personal consumption expenditures report, the Fed’s preferred inflation gauge, on Friday.
Separately, the ADP National Employment Report showed U.S. private payrolls unexpectedly declined in November. With official employment reports for October and November due only after the central bank’s policy announcement, market participants have placed more weight than usual on private-sector data.
“For market participants, at least, the Federal Reserve will have ammo to lay off the hawkish tone that we saw a couple of weeks ago and perhaps lean more dovish into what looks to be disappointing and weakening labor data as we get this kind of real-time restart of the data cadence that we’re used to,” said Keith Buchanan, senior portfolio manager at Globalt Investments in Atlanta.
“That’s something that the markets are obviously receiving really well today, and we’ll see as the onslaught of data continues if it will continue with this tone, and the markets will continue to receive it in the same way.”
The Dow Jones Industrial Average rose 408.44 points, or 0.86 per cent, to 47,882.90, the S&P 500 gained 20.35 points, or 0.30 per cent, to 6,849.72 and the Nasdaq Composite gained 40.42 points, or 0.17 per cent, to 23,454.09.
Microsoft fell as much as 3 per cent after a report said the tech giant has cut AI software sales quotas after many sales staff missed their targets in the fiscal year that ended in June.
But shares bounced off session lows to decline by as little as 1.2 per cent after CNBC said Microsoft denied the report, which helped pull the S&P 500 and Nasdaq into positive territory. Microsoft closed down 2.5 per cent.
The tech sector finished 0.4 per cent lower, one of two S&P 500 sectors in the red. Energy, up 1.8 per cent, was the best performing sector, lifted in part by a rise in oil prices.
Traders’ expectations for a 25-basis-point cut at next week’s Fed meeting inched up to 89 per cent after the data, up from around 87 per cent earlier in the day, according to CME’s FedWatch Tool.
Investors weighed a report that President Donald Trump’s administration has abruptly canceled interviews with finalists for the Fed chair role. This fueled expectations that Kevin Hassett - seen as likely to favor aggressive interest rate cuts - will replace Jerome Powell next May.
Rate cut expectations have also lifted small caps recently, with the Russell 2000 index gaining nearly 2 per cent on the session, following last week’s 5.5 per cent surge - its strongest weekly performance in more than a year.
“We expect small caps to outperform in 2026, with earnings to drive returns,” said Jill Carey Hall, equity and quant strategist at BofA Securities, adding that Fed rate cuts and a strong capex cycle would be strong drivers.
Marvell Technology jumped 7.9 per cent after the chipmaker said it will buy semiconductor startup Celestial AI in a deal worth US$3.25-billion.
Microchip Technology rallied 12.2 per cent after the chipmaker raised its expectations for third-quarter results. American Eagle Outfitters surged 15.1 per cent after raising its annual comparable sales forecast, betting on strong demand during the holiday season.
Advancing issues outnumbered decliners by a 2.88-to-1 ratio on the NYSE and by a 2.73-to-1 ratio on the Nasdaq.
The S&P 500 posted 27 new 52-week highs and two new lows while the Nasdaq Composite recorded 108 new highs and 96 new lows.
Volume on U.S. exchanges was 15.44 billion shares, compared with the 18.19 billion average for the full session over the last 20 trading days.
Reuters