Canada’s main stock index closed at a record high on Wednesday, with mining stocks leading the advance, buoyed by renewed U.S. rate cut optimism and robust earnings from major U.S. banks that signaled strength in the financial sector. The S&P 500 also ended higher following a volatile session.
The S&P/TSX Composite Index closed up 283.51 points, or 0.9%, at 30,637.12, surpassing the previous record high close on Oct. 6. It also set a new intraday high.
Gains were broad-based in Toronto, with most major sectors trading in positive territory.
Gold broke through US$4,200 an ounce for the first time to extend its record-breaking run, helping to lift materials stocks 3%.
Strong earnings from U.S. banking giants set an encouraging tone for Canadian lenders, lifting heavyweight financial stocks in Toronto by 0.3%.
“We are seeing the major banks in the U.S. reporting fantastic numbers, and there is no reason to believe Canadian banks will not report good numbers next month,” said Allan Small, senior investment advisor at the Allan Small Financial Group with iA Private Wealth.
Market sentiment also received a boost from Federal Reserve Chair Jerome Powell’s dovish-leaning comments on Tuesday, which refocused attention on growing expectations for rate cuts.
Traders are now pricing in a quarter-point cut at the Fed’s October 28-29 meeting, followed by another reduction in December, according to data compiled by LSEG.
“Lower interest rates help markets, period,” Small said. “The reality is that Canadian equities are heavily influenced by U.S. monetary policy and economic stimulus.”
The Bank of Canada will announce its rate decision on October 29, with markets now assigning a 65% probability to a 25-basis-point cut. Those odds have risen this week, despite Friday’s unexpectedly strong employment report. The latest inflation reading at the end of this month will be key to the central bank’s decision.
On Wall Street, Morgan Stanley rose 4.7% and hit a record high, while Bank of America rose 4.3% after the top lenders beat estimates for third-quarter profit on dealmaking strength.
The S&P 500 banking index rose in its first three-day winning streak in more than three weeks. A day earlier, Goldman Sachs and JPMorgan Chase reported solid performance in investment banking and predicted that the business would continue to boom.
This week’s bank results indicate strength for major U.S. companies as third-quarter earnings season kicks off, and they also provide hints of the economy’s health while many macroeconomic reports remain on hold due to a government shutdown.
“People are spending, and the consumer seems to be fine. That’s been one of the messages from the bank earnings,” said Thomas Martin, senior portfolio manager at GLOBALT in Atlanta. “Employment is not falling like a stone. Both inflation and employment are within ranges that are basically reasonable.”
The Philadelphia Semiconductor Index jumped 3% after ASML reported third-quarter orders and operating income above market expectations, lifted by booming AI investment. Meanwhile, an investment consortium including BlackRock, Microsoft and Nvidia will buy one of the world’s biggest data center operators in a $40 billion deal. Shares of data center firms rose, with Applied Digital surging 7.7%.
The S&P 500 gained 0.4%, while the Nasdaq Composite gained 0.6%. The Dow Jones Industrial Average fell 0.04%.
The latest flare-up in U.S. and China relations were closely monitored.
U.S. Treasury Secretary Scott Bessent told CNBC that Washington did not want to escalate a trade conflict with China, emphasizing that President Donald Trump is ready to meet Chinese President Xi Jinping in South Korea later this month.
On Tuesday, Trump said Washington was considering cutting some trade ties with China, including in relation to cooking oil. Also on that day, the two countries began imposing tit-for-tat port fees.
Bessent also said he plans to present three or four Federal Reserve chief candidates to Trump for him to interview sometime after the U.S. Thanksgiving holiday.
Fed Governor Stephen Miran at a CNBC event said “two more cuts this year sounds realistic,” noting that the labor market has clearly weakened.
Reuters, Globe staff