(Toronto) Canada’s main stock index gained 1.2% on Thursday, helped by broad-based strength. Wall Street also advanced, nearing record highs. The technology sector led the gains, with the NASDAQ climbing 2.3%.
The S&P/TSX composite index climbed 272.71 points to 23,032.72.
In New York, the Dow Jones industrial average rose 554.67 points to 40,563.06. The S&P 500 index gained 88.01 points to 5,543.22, while the NASDAQ composite index jumped 401.89 points to 17,594.50.
This week, markets are coming back strong, said Kevin Burkett, portfolio manager at Burkett Asset Management, as concerns that the U.S. Federal Reserve is waiting too long to cut its benchmark interest rate fade.
“Optimism is returning to the market,” he said, adding that such fears have been a major factor in recent volatility.
Weak jobs data had fueled concerns about a recession, but Thursday’s stronger-than-expected retail sales report helped strengthen the case for a soft landing, Burkett said.
A strong earnings report from Walmart also helped paint a picture of a resilient American consumer, Burkett added.
“Today you saw economic concerns ease as Walmart results and retail economic news came in much better than expected,” the expert said.
The Fed is expected to begin cutting its benchmark rate in September, Burkett said, noting that countries like Canada have already started.
However, the magnitude of the next cuts by the Fed and the Bank of Canada is in question, he said, with some betting they could be outsized cuts of 50 basis points (0.5%).
Markets may be juggling unrealistic expectations for lower interest rates and economic strength, Burkett said.
“The stock market seems to believe that on a day like today, the way is clear and we are heading towards more positive events in the future,” he said.
It is unlikely, in my view, that the economy can be strong and that stock markets can rise further at the same time as interest rates are falling, because if the economic data does not reflect the slowing economy, it is too early to cut rates.
Kevin Burkett, Portfolio Manager at Burkett Asset Management
The Canadian dollar was trading at 72.91 US cents on Thursday compared with 72.93 US cents on Wednesday.
Crude oil rose $1.15 to $76.99 a barrel and natural gas fell two cents to $2.20 per million BTU.
Gold rose $12.70 to $2,492.40 an ounce and copper rose 11 cents to $4.15 a pound.