(Toronto) Canada’s main stock index gained nearly 350 points on Thursday, driven by a broad market rally, while Wall Street also regained strength.
“It’s been a busy week,” said Ashish Utarid, assistant vice president of investment strategy at IG Wealth Management.
Stocks fell sharply on Monday, reacting to weaker-than-expected U.S. labor market data. An interest rate hike by the Bank of Japan also sent shockwaves around the world. Investors sold stocks to try to mitigate the risks of investing with cheap funds, borrowed mainly in yen.
US markets recovered some of their losses on Tuesday before returning to the red on Wednesday.
On Thursday, markets rallied, making the week — so far — a blip, Utarid said. In fact, Thursday was the S&P 500’s best day since 2022, with the index up 2.3%, while the NASDAQ climbed 2.9% and the Dow Jones rose 1.8%.
“Ultimately, what we saw was potentially the appropriate response.” The rally did not hit “companies that had seen very high valuations and excess returns over the last 12 months,” he added.
In New York, the Dow Jones industrial average gained 683.04 points to 39,446.49. The S&P 500 index rose 119.81 points to 5,319.31, while the NASDAQ composite index climbed 464.22 points to 16,660.02.
The S&P/TSX composite index gained 344.66 points to 22,225.61.
Recent employment data showed a slowdown in the labor market, which is what central banks were trying to achieve, Utarid said.
“There is going to be a period of adjustment, and that is exactly why the policy rate was raised,” he said.
In the United States, where the central bank is expected to begin cutting interest rates in September, the next eight weeks will be critical to understanding the trajectory of economic data, he said.
We’re moving toward a normalization of rates, we’re moving toward a normalization of the unemployment rate, and we’re moving toward a normalization of steady job growth.
Ashish Utarid, Assistant Vice President of Investment Strategy at IG Wealth Management
Some in the market are betting that the U.S. Federal Reserve could even cut its rate by 50 basis points (0.5%) in September, but Mr. Utarid thinks that would be an overreaction by the central bank.
Corporate profits in the second quarter have been good overall so far, he said, with consumers appearing relatively resilient despite the slowing economy.
On the currency market, the Canadian dollar was trading at 72.76 US cents on Thursday compared to 72.79 US cents on Wednesday.
On the New York Commodity Exchange, the price of oil rose 96 US cents to US$76.19 per barrel and natural gas climbed two US cents to US$2.13 per million BTU.
Gold gained $30.90 to $2,463.30 an ounce and copper rose one cent to $3.96 a pound.