Base metal and battery metal stocks led a broad-based rally on the TSX Thursday, as Canada’s main stock index climbed almost 150 points, while U.S. stock markets also moved higher.
The S&P/TSX composite index closed up 149.35 points at 20,778.80.
In New York, the Dow Jones industrial average was up 158.11 points at 37,248.35. The S&P 500 index was up 12.46 points at 4,719.55, while the Nasdaq composite was up 27.59 points at 14,761.56.
Equities drifted higher in a continuation of Wednesday’s rally, said Macan Nia, co-chief investment strategist at Manulife Investment Management.
The U.S. Federal Reserve on Wednesday announced it was holding its overnight rate and gave forecasts that indicated it expects to cut rates three times next year.
“Inflation keeps coming down, the labour market keeps getting back into balance and, it’s so far, so good,” said Fed chairman Jerome Powell.
Markets are also seeing a broader continuation of the upward trend since the end of October as investors increasingly price in interest rate cuts for the new year, said Nia.
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That trend has been marked by a strong rally in risk assets and a drop in bond yields, he said.
But investors may be a little ahead of themselves, Nia noted.
“Given the rally, and I think a little bit too much optimism, it’s likely that investors would be well served to be a bit cautious as we go into 2024.”
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The Bank of Canada, which is dealing with a weaker economic backdrop than the Fed, may move first, said Nia.
“Our economy is much more interest-rate sensitive,” he said.
It’s widely expected both central banks will be in cutting mode in 2024, but Nia thinks the Bank of Canada could cut earlier and in larger increments.
Now that the last North American central bank decision of the year is out of the way, investors will spend the next couple of weeks looking at their asset allocations when it comes to equities versus bonds, said Nia.
Barring any market-moving news, he expects the rally to stick, with markets continuing to drift higher into the holidays.
The Canadian dollar traded for 74.52 cents US compared with 73.74 cents US on Wednesday.
The January crude oil contract was up US$2.11 at US$71.58 per barrel and the January natural gas contract was up six cents at US$2.39 per mmBTU.
The February gold contract was up US$47.60 at US$2,044.90 an ounce and the March copper contract was up 11 cents at US$3.89 a pound.
— With files from The Associated Press
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