Canada’s main stock index rose on Monday, led by gains for resource shares as the seasonal optimism of investors offset an uncertain outlook for the Canadian economy and domestic political uncertainty.
The S&P/TSX composite index ended up 149.50 points, or 0.6%, at 24,748.98, extending its rebound from a six-week low on Thursday.
U.S. markets also notched gains after a stopgap government funding bill averted a U.S. government shutdown.
“We’re seeing the beginnings of a ‘Santa Claus rally’ as stocks continue to show strong momentum into year-end,” said Brandon Michael, senior investment analyst at ABC Funds, referring to the tendency for stocks to advance in the period around the Christmas Day holiday.
The TSX has climbed 18.1% since the start of the year. Still, that is less than the roughly 25% advance for the S&P 500.
“While the TSX is up today, it’s lagging behind, and that’s reflecting narrower breadth and a lack of exposure to high-growth sectors like AI, robotics, and quantum computing in Canada,” Michael said. “Additionally, the Canadian economy is facing challenges, not being helped by the current political situation, and the Canadian dollar is under pressure with the need for potentially more aggressive rate cuts.”
Minutes from the Bank of Canada’s December meeting showed the decision to opt for a larger than usual 50-basis-point interest rate cut reflected a weaker outlook for growth than forecast in October.
Canadian Prime Minister Justin Trudeau, whose party looks set to lose power early next year, is under increasing pressure from his own legislators to step down and let someone else take over.
The energy sector rose 2% even as the price of oil settled 0.3% lower at $69.24 a barrel. The materials group, which includes metal mining shares, also notched gains, advancing 0.7%.
Eight of 10 major TSX sectors ended higher.
On Wall Street, gains by many of the so-called Magnificent Seven tech stocks pushed benchmarks up on a holiday-thinned trading day.
With megacap stocks having outsized influence on markets, their performance during a week in which many investors take time off will be even more pronounced.
Meta Platforms, Nvidia and Tesla all closed higher, with Google parent Alphabet also in positive territory.
The gains helped propel the Nasdaq Composite to its third straight increase, and a second advance in three sessions for the S&P 500.
The S&P 500 gained 0.7%, while the Nasdaq Composite gained almost 1%. The Dow Jones Industrial Average rose nearly 0.2%.
After a solid run since the November presidential election, Wall Street’s rally hit a bump this month, especially after the U.S. Federal Reserve forecast just two 25-basis-point rate reductions for 2025 - down from its September view of four cuts - and raised its annual inflation outlook.
This included a selloff last Wednesday triggered by the U.S. Federal Reserve signaling a slower rate-cut pace.
Chris Zaccarelli, chief investment officer at Northlight Asset Management, noted that while some course correction has occurred in recent days, as interest-rate expectations have been modified by investors, many of the same trends remain in place, including tech and tech-enabled stocks finding favor.
“We’re really seeing a microcosm today of what we’ve seen all year long, and the trends are back in place despite what we’ve seen in the last couple of weeks where things bounced around a little bit,” Zaccarelli said.
As well as major benchmark gains, a majority of the S&P sectors finished higher on Monday, led by communication services .
Since 1969, the last five trading days of the year, combined with the first two of the following year, have yielded an average S&P 500 gain of 1.3% - a period known as the “Santa Claus Rally”, according to the Stock Trader’s Almanac.
Northlight’s Zaccarelli said he believed conditions were right for such a rally, as this year’s gains would likely mean investors would hold on to positions as opposed to selling and booking losses which they can use for tax purposes.
Qualcomm’s shares rose after a jury found its central processors are properly licensed under an agreement with UK-based Arm Holdings. Shares of Arm, which has vowed to seek a fresh trial, fell.
Walmart dropped after the U.S. consumer finance watchdog accused the retail giant and workforce payments company Branch Messenger of forcing more than a million delivery drivers into using accounts that cost them more than $10 million in junk fees.
Eli Lilly gained after the U.S. Food and Drug Administration approved the drugmaker’s weight-loss treatment, Zepbound, for obstructive sleep apnea. Shares of sleep apnea device makers ResMed and Inspire Medical fell.
Nordstrom’s shares declined after the department store chain’s founding family and Mexican retailer El Puerto de Liverpool agreed to take the company private.
Reuters, Globe staff