Markets continue recovery from mid-week selloff as S&P 500 notches new all-time high

The exterior of the TMX is seen in Toronto, Wednesday, Nov. 1, 2023. THE CANADIAN PRESS/Chris Young. CHY/

Canada’s main stock index gained 1.6 per cent on Thursday, led by strong gains in the energy sector, while U.S. markets also rose, with the S&P 500 notching a new all-time high.

The S&P/TSX composite index closed up 333.29 points at 21,222.69.

In New York, the Dow Jones industrial average was up 348.85 points at 38,773.12. The S&P 500 index was up 29.11 points at 5,029.73, while the Nasdaq composite was up 47.03 points at 15,906.17.

Mixed messages from inflation readings are driving short-term market volatility, said Kevin Burkett, portfolio manager at Victoria-based Burkett Asset Management.

On Tuesday, hotter-than-expected U.S. CPI numbers drove markets into a selloff, but much of that was recovered in the following days.

“The numbers themselves aren’t bad. I think that the issue is people’s expectations, in particular at the end of December, had become so aligned to this view that we would see imminent and steep rate cuts,” said Burkett.

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“And what we’ve seen in the last two months, in particular, is people start to think more realistically about the timing with which we can expect policymakers to begin to cut rates.”

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Right now there’s very little chance that either the Bank of Canada or the U.S. Federal Reserve will start cutting interest rates in March, said Burkett. As well, expectations for how many cuts the entirety of 2024 will bring have come down significantly in recent weeks, he said.

“The challenge is that with inflation stubbornly elevated, it’s awfully hard for monetary policymakers to justify cutting rates and risk undoing (the effects of) the rate hikes of the last 12 to 24 months,” he said.

Thursday saw the latest retail sales report in the U.S., with sales in January weakening by more than expected, which could remove some pressure on inflation.

Recent earnings reports in Canada have highlighted the disparity between companies that have more pricing power — like insurance or grocery companies — and those more on the discretionary side, said Burkett.

Manulife’s stock price soared by almost nine per cent Thursday after it reported higher earnings in the latest quarter.

Meanwhile, Canadian Tire reported a drop in profits in the latest quarter amid tougher economic conditions and softer consumer spending, though its stock price didn’t move significantly Thursday.

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The Canadian dollar traded for 74.11 cents US compared with 73.80 cents US on Wednesday.

The April crude oil contract was up US$1.23 at US$77.59 per barrel and the March natural gas contract was down three cents at US$1.58 per mmBTU.

The April gold contract was up US$10.60 at US$2,014.90 an ounce and the March copper contract was up six cents at US$3.76 a pound.

— With files from The Associated Press

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