Achi news desk-
Canada’s main share index climbed on Wednesday, boosted by materials and financial stocks, as investors awaited further clues on the Federal Reserve’s rate cut path for the year.
At 10:46 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite was up 60.43 points, or 0.31%, at 22,144.53.
Materials-linked stocks rose 0.9% as copper prices hit a two-week high, while gold prices caught a breath after reaching a new high.
Energy stocks rose 0.5 percent and were set to extend their gains into a Thursday session on rising oil prices, as investors weighed supply risks from global geopolitical conflicts, while OPEC+ ministers held current output cuts at the meeting.
Financial heavyweights also rose 0.7%, while healthcare stocks rose 0.6%.
The Canadian benchmark retreated from a series of record closing highs in the previous session, as uncertainty surrounding the Federal Reserve’s rate cut path clouded investor sentiment.
“The markets and the Fed are pricing in three cuts, but now we’re starting to hear some Fed governors talking about only one or two. If we get closer to June, and inflation doesn’t come close to the target, we may go down to two cuts for the rest of the year,” said Alan Small, senior investment advisor of the Financial Group Ellen Katana with iA Private Wealth.
In the US, private wage rates grew more than expected in March, while a separate reading showed that growth in the US services sector slowed in March.
Investors’ focus will now shift to Fed Chairman Jerome Powell’s speech in the San Francisco Bay Area at 12:10 PM ET on Wednesday.
“Powell said last time that three rate cuts are still on the agenda. He may say something different today and it may change in the market,” Small said.
In Canadian corporate news, shares of professional services firm WSP Global fell 4.7% after short seller Spruce Point Capital Management shorted the company.
Shares of Lightspeed Commerce rose 4.9% after the payments company announced 2,800 job cuts, with the intention of becoming profitable.
US stock indexes held steady on Wednesday after their worst day in weeks.
The S&P 500 rose 0.2% in morning trading, retrieving a bit of its 0.7% loss from the previous day. The Dow Jones Industrial Average rose 64 points, or 0.2%, and the Nasdaq Composite gained 0.1%.
Cal-Maine Foods rose 6% after reporting a stronger-than-expected profit last quarter by selling a record number of eggs. Intel, meanwhile, tumbled 6.2 percent after revealing for the first time financial details about key parts of its business, including its money-losing foundry business.
Stocks have generally slowed their slide since rallying 26% from November to March. Concerns are growing that a remarkably resilient US economy may prevent the Federal Reserve from making as many rate cuts this year as it had previously hoped. Critics also said that at least a pullback was overdue after stock prices rallied a few notches.
The Fed has indicated it may still cut its key interest rate three times this year. Lowering its key rate from its highest level since 2001 would offer relief to the economy and the financial system, while boosting investment prices. But Fed officials say they will start cutting only if more evidence comes in showing that inflation is edging toward their 2 percent target.
Some reports on the economy have come in stronger than expected recently. Such strength encourages Wall Street because it means the economy continues to avoid recession, and it should provide support for corporate earnings. But it could also add upward pressure on inflation and discourage the Fed from cutting interest rates.
Traders were encouraged by a report on Wednesday morning showing that U.S. construction, retail and other service businesses continued to grow last month, but not as much as economists expected. Perhaps more importantly, the Institute of Supply Management report also states that the index of prices paid is at its lowest level since March 2020. This is an encouraging trend for inflation.
This follows a report earlier in the morning that showed stronger than expected increases in hiring in the private sector. This report from the ADP research institute suggested that employers accelerated their hiring last month, when economists had predicted a slowdown.
A more comprehensive report on the labor market for March is due from the US government on Friday, which will likely be the main economic data of the week.
Traders have already drastically reduced their expectations for the number of times the Federal Reserve will cut interest rates this year, cutting them in half from the forecast of six at the start of the year. Some are preparing for two or even zero cuts this year because the Fed may not want to start cutting rates too close to the November election for fear of looking political.
In the bond market, yields rose to increase pressure on stocks. The 10-year yield climbed to 4.39% from 4.36% late Tuesday. It pared its gains following a cooler-than-expected report on U.S. services business.
The two-year yield, which closely tracks expectations for Fed action, rose to 4.71% from 4.70%.
A rise in oil prices also added pressure on inflation. A barrel of US crude climbed again, up 0.9% to $85.78, to bring its year-to-date gain to nearly 20%. Brent crude, the international standard, has risen by a similar amount and is up more than 16% so far in 2024.
In overseas stock markets, European indices were mixed amid modest moves. A report showed inflation in Europe cooled more than expected in March, but analysts say it will not be enough to prompt the European Central Bank’s first rate cut.
Asian markets fell more sharply earlier in the day, following Wall Street’s losses from Tuesday. The indices fell by 1.7% in Seoul, 1% in Tokyo and 1.2% in Hong Kong.
Reuters and Associated Press
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