Canada’s main index rose for a sixth straight day on Tuesday, led by technology shares, as the potential benefit of a business friendly U.S. government offset the economic uncertainty of trade tariffs that are expected in the coming days. Wall Street’s main indexes saw more substantial gains, with the S&P 500 and the Dow hitting their highest in more than a month, encouraged that Donald Trump did not start his second term with blanket tariff increases.
The S&P/TSX Composite Index ended up 110.05 points, or 0.4%, at 25,281.63, its highest closing level since Dec. 12. The daily winning streak was the longest since August.
Corporate profits could get a lift from tax cuts and looser regulation proposed by the new U.S. president. Trump has also proposed sweeping trade tariffs, which could include a 25% tax on imports from Canada beginning on Feb. 1.
“You’re balancing the fear of the Trump tariffs against the major short-term positive effect of the Trump presidency,” said Matt Skipp, president of SW8 Asset Management.
“If it hurts our economy it hurts our stock market to some extent but the actual direct impact of the tariffs (on the TSX) might be less than people think even if they come,” Skipp added.
U.S. operations are a major contributor to Canadian bank earnings, while energy and material companies benefit from a weaker Canadian dollar.
Combined, the financial and resource sectors account for 62% of the TTS’s weighting, while another block is made up of sectors such as telecommunication and real estate that don’t rely on exports.
The technology sector rose 1.6%, with shares of e-commerce company Shopify Inc up 1.9%. Financials added 0.8% and the interest-rate sensitive utilities sector ended 0.4% higher.
Canadian inflation slowed to a 1.8% annual rate in December, supporting bets for another rate cut by the Bank of Canada.
Energy was a drag, falling 1.3%, as the price of oil settled 2.6% lower.
Shares of business jet maker Bombardier were down 5.3%, giving back much of Monday’s gains.
While investors remain cautious about tariffs and the potential for a global trade war pushing inflation higher, brokerage Goldman Sachs Tuesday lowered its forecast for the chances of a universal tariff this year to 25% from about 40% in December.
“There was a definite relief and a bit of surprise that tariffs weren’t called out in the first round of executive actions that happened [Monday],” said Carol Schleif, chief market strategist at BMO Private Wealth. “Markets are leaping to the conclusion, probably rightfully so, that the administration will take a more nuanced approach.”
Investors hope the new administration will use the threat of trade levies as a negotiating tactic and take “a scalpel and not a sledgehammer to tariffs,” Schleif said.
However, with trade policies still unclear, Schleif cautioned the market could face volatility if Trump puts out trial balloons on tariffs since the market has not had a 10% correction in a long time.
The Dow Jones Industrial Average rose 537.98 points, or 1.24%, to 44,025.81, the S&P 500 gained 52.58 points, or 0.88%, to 6,049.24 and the Nasdaq Composite gained 126.58 points, or 0.64%, to 19,756.78, to close near its highest level since Jan. 6.
In a sign of broader market strength, the more domestically focused small-cap Russell 2000 index outperformed larger cap indexes with a 1.85% advance.
Among the S&P 500′s 11 major sectors, the sole loser was energy, down 0.64%, while six sectors rose at least 1%.
The biggest gainer was industrials, which rose 2.03% and was boosted by stocks including 3M, which rallied 4.2% after reporting upbeat fourth-quarter profits.
The utilities sector was lifted by nuclear power stocks after Trump issued a flurry of orders intended to boost energy production. Its biggest gainers included Vistra Corp , NRG Energy and Constellation Energy.
Heavyweight Apple was the S&P 500′s biggest drag, losing 3.2%, after brokerage Jefferies cut its rating to “underperform.”
Shares of automakers, which are most sensitive to tariffs due to their vast supply chains, rose. Gains in Ford, up 2.5%, trailed a 5.7% rally in General Motors, which had a rating upgrade from Deutsche Bank.
During the first year of Trump’s earlier administration, the S&P 500 rose 19.4%. The benchmark index rose nearly 68% through his four-year term, but saw bouts of volatility, stemming in part from a trade war Trump fought with China.
However, inflation is still above the Federal Reserve’s 2% target, fueling worries that the new administration’s policies could delay the central bank’s pace of monetary policy easing.
Economists see the Fed leaving borrowing costs unchanged when it meets next week and traders see the first interest rate cut coming in June, according to CME Group’s FedWatch tool.
In other individual stocks, Walgreens tumbled 9.2% after the Justice Department accused it of filling unlawful prescriptions for addictive painkillers and other drugs.
Moderna rallied 5.4% after securing $590 million from the U.S. government to hasten development of its bird flu vaccine.
Advancing issues outnumbered decliners by a 4.54-to-1 ratio on the NYSE, where there were 264 new highs and 39 new lows.
On the Nasdaq, 3,086 stocks rose and 1,374 fell as advancing issues outnumbered decliners by a 2.25-to-1 ratio.
The S&P 500 posted 41 new 52-week highs and no new lows while the Nasdaq Composite marked 119 new highs and 78 new lows.
On U.S. exchanges, 15.42 billion shares changed hands compared with the 15.47-billion average for the last 20 sessions.
Reuters, Globe staff