TSX posts small gain, U.S. markets rise ahead of Fed rate meeting and earnings

Strength in base metals helped Canada’s main stock index post a small gain Monday, while U.S. markets also rose.

U.S. markets were muted ahead of a big week for earnings reports, as well as a Wednesday interest rate decision by the U.S. Federal Reserve.

The S&P/TSX composite index closed up 42.38 points at 22,011.62.

In New York, the Dow Jones industrial average was up 146.43 points at 38,386.09. The S&P 500 index was up 16.21 points at 5,116.17, while the Nasdaq composite was up 55.18 points at 15,983.08.

This week, “all eyes are going to be on the Fed,” said Brianne Gardner, senior wealth manager of Velocity Investment Partners at Raymond James Ltd.

Coming into the year, markets expected about six cuts to the central bank’s key rate by the end of 2024. But a succession of stronger-than-expected economic reports have eroded those expectations.

“Things are slowing, even though there’s still strong growth and employment figures,” she said.

“But high inflation is kind of overshadowing any of these economic gains that we’re seeing.”

Now, expectations are closer to just one cut this year, said Gardner, with some expecting zero.

While the interest rate decision itself appears all but decided, investors will be watching for any comments from Fed officials on their direction, said Gardner.

“Virtually nobody is expecting the Fed to cut rates this week,” she said.

“(Fed chairman Jerome) Powell is likely going to continue to refer to the Fed’s stance in this restrictive territory.”

The Fed is likely going to be extra cautious with the presidential election coming up, she added.

Amid a slew of earnings reports this week, several big names could move markets, noted Gardner, including tech giants Amazon and Apple.

The biggest tech companies have been driving the rally that’s characterized much of 2024 on Wall Street, though April has seen somewhat of a correction.

However, “earnings momentum is kind of overshadowing this correction that we started to see in April,” said Gardner.

“So I think if the rest of the earnings season shades up, like we’ve seen so far, we could be at new highs again before you know it.”

But volatility will likely be heightened in May and June, she said.

The Canadian dollar traded for 73.22 cents US compared with 73.16 cents US on Friday.

The June crude oil contract was down US$1.22 at US$82.63 per barrel and the June natural gas contract was up 11 cents at US$2.03 per mmBTU.

The June gold contract was up US$10.50 at US$2,357.70 an ounce and the July copper contract was up 11 cents at US$4.68 a pound.