Canada’s main stock index posted on Tuesday a new record high, with financial shares participating in broad-based gains as U.S. inflation data reinforced expectations that the Federal Reserve would cut interest rates in September.
The S&P/TSX composite index ended up 146.03 points, or 0.5 per cent, at 27,921.26, edging past the record closing high it posted last Wednesday.
U.S. consumer prices increased marginally in July, though rising costs for services such as airline fares and some tariff-sensitive goods like household furniture caused a measure of underlying inflation to post its largest gain in six months.
“Inflation is on the rise, but it didn’t increase as much as some people feared,” said Ellen Zentner, chief economic strategist for Morgan Stanley Wealth Management.
“In the short term, markets will likely embrace these numbers because they should allow the Fed to focus on labor-market weakness and keep a September rate cut on the table.”
Canada sends about 75 per cent of its exports to the United States, much of which are exempt from U.S. tariffs under a continental trade pact, so its economy could benefit if the Fed moves to stimulate growth.
The heavily weighted financials sector rose 0.7 per cent, with shares of Brookfield Corp up 1.9 per cent.
Real estate was up 1.1 per cent, while the materials group , which includes metal mining shares, added 0.9 per cent as gold and copper prices moved higher.
Altus Group AIF.TO is exploring a potential sale after receiving inbound acquisition interest, two people familiar with the matter said. Shares of the software and data analytics provider focused on the real estate industry jumped 9.5 per cent.
Nine of 10 major sectors ended higher. The exception was utilities, which lost 0.1 per cent.
Gildan Activewear Inc shares fell 3.7 per cent after a report that the apparel manufacturer is nearing a deal to acquire Hanesbrands
The S&P 500 and the Nasdaq scored record closing highs on Tuesday, as news that July inflation rose broadly in line with expectations bolstered bets on a Federal Reserve interest rate cut next month.
The
Labor Department said the Consumer Price Index (CPI) rose 0.2 per cent on a monthly basis in July, while annual inflation came in slightly below forecasts, drawing calls from U.S. President Donald Trump to lower interest rates.
Yields on shorter-dated Treasury bonds - a reflection of interest rate expectations - slipped and rate futures showed traders are giving an 88.8 per cent chance that the Fed could lower rates by about 25 basis points in September.
“The CPI data is supportive for equities overall, getting some good news with the Fed looking more on track to cut in September and potentially more transitory inflation,” said Katherine Bordlemay, co-head of client portfolio management, fundamental equities at Goldman Sachs Asset Management.
“The first thing I’d guide is continue to lean into the theme of the big are getting bigger. We continue to have conviction around mega-tech and technology.”
Alphabet shares rose 1.2 per cent as Perplexity made a $34.5 billion cash offer to buy the company’s Chrome browser.
Intel Corp climbed 5.6 per cent after Trump said he met its CEO, Lip-Bu Tan, on Monday, praising Tan and calling the meeting “very interesting.”
Last week, Trump demanded Tan’s immediate resignation , calling him “highly conflicted” over his ties to Chinese firms.
The Dow Jones Industrial Average rose 483.52 points, or 1.10 per cent, to 44,458.61, the S&P 500 gained 72.31 points, or 1.13 per cent, at 6,445.76 and the Nasdaq Composite advanced 296.50 points, or 1.39 per cent, to 21,681.90.
The quality of economic data remains a concern weeks after Trump fired the head of the Bureau of Labor Statistics following downward revisions to previous months’ nonfarm payrolls counts. Markets are monitoring developments around Trump’s nominee, E.J. Antoni, to the bureau commissioner post and potential candidates for the Fed’s top job.
“This is still early innings of this process and just as the Fed will be beginning to cut rates in the autumn, that’s when the inflation data will probably start to be registering some of these more direct tariff price increases and it’s going to complicate the rate-cutting decision,” said John Velis, a macro strategist at BNY.
Relief came as the U.S. and China extended their tariff truce until November 10, staving off triple-digit duties on each other’s goods.
U.S. stocks have rallied in recent weeks on the back of strong tech earnings, easing trade tensions, and increased rate cut expectations.
Inflows into U.S. stocks last week were the largest in two years, BofA Global Research data showed.
The Russell 2000 index, tracking small-cap companies, advanced almost 3 per cent.
An index tracking airline stocks surged 8.87 per cent, its biggest one-day rise in over a month after data showed airfares rose 4 per cent in July.
Bank stocks rallied, with the S&P 500 Banks index up 2.1 per cent, as analysts said a steepening yield curve could help bank earnings as lenders could borrow cheap and lend at a higher rate.
Cardinal Health dropped 7 per cent after the drug distributor said it will buy healthcare management firm Solaris for $1.9 billion.
Reuters