Strength in energy, technology and battery metals stocks helped Canada’s main stock index tick higher Wednesday, while U.S. stock markets also rose.
This week, the markets have been fighting back after a weak and volatile month of August, albeit with the lower volume that normally comes at summer’s end, said Greg Taylor, chief investment officer at Purpose Investments.
The historical volatility of August normally carries into September, he said.
“We might be (in) a bit of a quiet relief rally for the last week of the month, but probably setting up for some more fireworks in the next few weeks.”
The S&P/TSX composite index closed up 39.91 points at 20,330.32.
In New York, the Dow Jones industrial average was up 37.57 points at 34,890.24. The S&P 500 index was up 17.24 points at 4,514.87, while the Nasdaq composite was up 75.55 points at 14,019.31.
Markets are still taking any negative economic news as positive as they look for continued affirmation that rate hikes are working on inflation, said Taylor.
“The weaker data’s going to lessen the odds of central banks hiking rates as aggressively as they have in the past,” he said.
“We’ll see how long this holds until the bad news becomes bad again.”
After Tuesday’s rally on cooling job openings and lower consumer confidence, investors got more reassurance on Wednesday.
A survey of private-sector employers in the U.S. showed hiring cooled more than expected, while the U.S. downgraded its economic growth estimate for the second quarter.
The U.S. Federal Reserve is likely to hold rates in September, and the cooling data boosts hope that it could end its cycle, said Taylor _ though it won’t announce that anytime soon.
“I think they would like to lean in the data-dependent camp as much as possible.”
The Bank of Canada is a little ahead of the Fed, said Taylor, with the impact of its rate hikes a little more digested by the economy.
“It’s probably a lot more likely that the Bank of Canada is in full pause mode already and is going to start sending more of those signals,” he said.
Canadian bank earnings have helped illustrate the cooling economy, with National Bank reporting on Wednesday that provisions for credit losses were up and loan growth slowed.
A big question is at what point bad news starts being bad news again for investors, said Taylor.
While a soft landing is all but agreed upon by investors, they may be jumping the gun, he said.
“It’s hard to say that we’re out of the woods yet from having a full-on recession in the next six months.”
Amid the broader economic picture Wednesday, cannabis stocks surged on reports the U.S. is looking at descheduling the substance, noted Taylor.
Shares in Canopy Growth Corp. rose nine per cent, while Tilray Brands Inc. was up more than 10 per cent, the second-best performing stock on the TSX Wednesday.
The Canadian dollar traded for 73.88 cents US compared with 73.57 cents US on Tuesday.
The October crude contract was up 47 cents at US$81.63 per barrel and the October natural gas contract was up 13 cents at US$2.80 per mmBTU.
The December gold contract was up US$7.90 at US$1,973 an ounce and the December copper contract was up half a penny at US$3.84 a pound.
–With files from The Associated Press