Canada’s main stock index differentiated itself from sliding U.S. markets Thursday, gaining more than 150 points on the back of better-than-expected quarterly results from Royal Bank and CIBC.
The S&P/TSX composite index was up 173.73 points at 22,071.71, driven by gains in the financial sector, which climbed 1.89 per cent in the day’s trading.
The big winners were Royal Bank — which closed up 5.19 per cent after announcing a dividend hike and share buyback plan in the wake of the successful close of its HSBC Canada acquisition – and CIBC, which gained 7.01 per cent after reporting a second-quarter profit of $1.75 billion, up from $1.69 billion in the same quarter last year.
South of the border, it was a different story.
In New York, the Dow Jones industrial average closed down 330.06 points at 38,111.48, while the S&P 500 index was down 31.47 points at 5,235.48. The Nasdaq composite closed down 183.50 points at 16,737.08.
The declines were largely the result of losses in the tech sector. U.S. software giant Salesforce saw its stock suffer its worst day in nearly 20 years, losing nearly a fifth of its value after reporting weaker revenue for the latest quarter than analysts expected.
Nvidia also fell Thursday, sinking 3.8 per cent for its first drop since soaring more than 20 per cent following its earnings report last week.
The tech-sector losses were significant enough to drag down the main U.S. indexes even though the majority of Wall Street stocks gained Thursday.
On the TSX, technology was the only sector to close in the red Thursday, falling 1.84 per cent.
“We’ve seen a run-up in valuations in that sector and now I think people are going to start taking profits,” said Brianne Gardner, senior wealth manager with Velocity Investment Partners at Raymond James.
“The tech sector really was the biggest loser of the day.”
A piece of economic data that caught investors’ attention was a fresh report on U.S. GDP, which suggested the overall U.S. economy’s growth may not have been quite as strong in April as expected.
Markets are keenly watching for any signs that could indicate the U.S. Federal Reserve might be getting ready to cut interest rates.
While Thursday’s report could be interpreted as evidence in that direction, Gardner said investors are more interested in a different U.S. government report — one that the Federal Reserve prefers to use to measure inflation — set to be released Friday.
While investors want to see the economy cool enough to prompt central banks to cut interest rates, there is a risk of central bankers waiting too long and tipping the economy into recession, Gardner said.
“We think historically, the Fed and the Bank of Canada have been notorious for waiting too long to cut rates,” she said.
While summer is typically a quieter time for stock markets, Gardner said the unusual lack of volatility on the TSX so far this year makes her wonder if the market could be headed for a bit of summer-time choppiness.
In the meantime, she said there are still pockets of opportunity out there for savvy investors.
“The S&P is still 1.3 per cent below its peak, while the TSX is 1.88 per cent below its peak. So there’s still some room to run, and we are still more bullish than bearish on the stock market,” Gardner said.
The Canadian dollar traded for 73.11 cents US compared with 72.99 cents US on Wednesday.
The July crude contract was down US$1.32 at US$77.91 per barrel and the July natural gas contract was down 10 cents at US$2.57 per 1,000 cubic feet.
The August gold contract was up US$2.40 at US$2,366.50 an ounce and the July copper contract was down 13 cents at US$4.66 a pound.
— With files from The Associated Press
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