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S&P/TSX composite index up, U.S. markets soar on Fed optimism

A sign board displays the TSX outside the Richmond Adelaide Centre in the financial district in Toronto on Wednesday, September 29, 2021. THE CANADIAN PRESS/Evan Buhler. EEB

Canada’s main stock index gained almost one per cent Wednesday after dipping in the morning, with gains in metals, industrials and other sectors offsetting a slip in energy stocks, while U.S. markets posted stronger gains.

Comments by the head of the Federal Reserve sparked optimism in U.S. markets, said Greg Taylor, chief investment officer at Purpose Investments, with tech stocks posting strong gains and pulling the Nasdaq up by more than four per cent.

Fed chair Jerome Powell said Wednesday that the central bank could soon start slowing its rate increases, reaffirming expectations that the end of the cycle is near.

This last real update from the Fed before the last rate announcement of the year in the U.S. was probably “a little more dovish than some had feared,” said Taylor.

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“He’s definitely sending signals that the December meeting is going to be a 50-basis-point hike, and also talking more about slowing the pace of rate hikes,” said Taylor.

“And that’s exactly what the market wanted to hear.”

The S&P/TSX composite index was up 175.85 points at 20,453.26.

In New York, the Dow Jones industrial average was up 737.24 points, or 2.18 per cent, at 34,589.77. The S&P 500 index was up 122.48 points, or 3.09 per cent, at 4,080.11, while the Nasdaq composite was up 484.22 points, or 4.41 per cent, at 11,486.00.

With less tech exposure in Canada and some disappointing bank earnings, the TSX didn’t swing quite as dramatically as the U.S. indexes did, said Taylor.

Two banks reported earnings Wednesday: Royal Bank of Canada saw profits more or less unchanged from last year, while National Bank of Canada saw its profits go down four per cent.

“The banks are such a big part of the stock market, and with the earnings not being great, that’s probably weighing on the TSX performance,” Taylor said.

The Canadian dollar gained against U.S. dollar weakness, said Taylor.

The Canadian dollar traded for 74.03 cents US compared with 73.65 cents US on Tuesday.

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The January crude contract was up US$2.35 at US$80.55 per barrel and the January natural gas contract was down 31 cents at US$6.93 per mmBTU.

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Though oil prices were also up, the energy index on the TSX was down. However, gains were made in copper and base metals overall, with continued optimism about future demand from China, said Taylor.

“There is still some narrative out there that China is getting ready to reopen. And anytime you hear comments like that, the commodities start to have a good run,” he said.

“That’s certainly helped the oil price in the last few days.”

The February gold contract was down US$3.80 at US$1,759.90 an ounce and the March copper contract was up 10 cents at US$3.73 a pound.

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