(Toronto) Gains in the financial, industrial and materials sectors pushed up Canada’s main stock index on Monday, while U.S. stock markets also rose.
There was a slight reversal Monday from last week, which saw a lot of weakness and uncertainty heading into the weekend, said Greg Taylor, chief investment officer at Purpose Investments.
Technology stocks fell last week, giving up some of the ground gained during a months-long rally. But on Monday, markets were much calmer, Taylor said — after U.S. President Joe Biden announced over the weekend that he would not run in the next election.
It seems that with Mr. Biden’s withdrawal and the fact that no one is challenging [Kamala] Harris, that things might start to calm down on the election front for a little while. And that seems like good news. So we’re dispelling some of that nervousness in the markets.
Greg Taylor, Chief Investment Officer at Purpose Investments
In New York, the Dow Jones industrial average jumped 127.91 points to 40,415.44. The S&P 500 index rose 59.41 points to 5,564.41, while the NASDAQ composite index gained 280.63 points to 18,007.57.
In Toronto, the S&P/TSX composite index closed up 182.26 points at 22,872.65.
While the election itself is a stressor, the removal of uncertainty over who will run against Donald Trump appears to have brought some relief to markets, Taylor said.
“I think what we’re going to see now is that markets could actually, for a few weeks, focus back on earnings,” he said. “I think that would be a welcome change of pace.”
Greg Taylor, Chief Investment Officer at Purpose Investments
It’s still early in earnings season, Taylor said, but this week will see reports from a slew of major companies, including Alphabet and Tesla on Tuesday.
Investors will be paying attention to corporate spending on artificial intelligence, which has been a key driver of Wall Street’s recent strength, and wondering whether companies are cutting back on that spending, Taylor said.
“It’s starting to manifest as a fear that we’ve gotten carried away and maybe rushed things because of this AI hype.”
Last week, as technology stocks declined, investors began to shift to other sectors of the markets, which is a good thing, Taylor noted.
Even though investors appear to be returning to the tech sector this week, he hopes this broadening of the spectrum will continue.
“It’s a bullish argument for markets,” Taylor said.
In Canada, investors are waiting for the Bank of Canada to announce its key interest rate decision on Wednesday. A cut is not guaranteed, but many believe it is likely, Taylor said.
“It seems the view of the bookmakers is that they will cut one more and then pause,” he said, adding that after that, the Bank of Canada will likely want to wait until the U.S. central bank starts cutting rates to avoid too wide a gap between the two organizations’ policies.
The U.S. Federal Reserve is expected to begin cutting interest rates in September, he said.
On the currency market, the Canadian dollar was trading at 72.70 US cents on Monday, compared to 72.85 US cents on Friday.
On the New York Commodity Exchange, crude oil was down 24 cents at $78.40 a barrel and natural gas was up 12 cents at $2.25 per million BTU.
The gold contract was down $4.40 at $2,394.70 an ounce and the copper contract was down four cents at $4.20 a pound.