US inflation surprise fuels rate cut bets, lifting Canadian equities for a second straight day
On Tuesday, a rally in Canada’s real estate sector propelled the S&P/TSX composite index to a 146.03-point gain, closing at 27,921.26.
The Canadian Press reported that strength in financials also contributed, and the performance reflected broader optimism in global markets after better-than-expected US inflation data.
Macan Nia, co-chief investment strategist at Manulife Investment Management, said the “risk-on” rally in the US helped lift Canadian equities alongside gains in Europe.
He added that the S&P 500 and Nasdaq drove much of the momentum, as investors closely watched whether the inflation numbers would influence the US Federal Reserve’s September rate decision.
In New York, Tuesday’s trading saw the Dow Jones industrial average rise 483.52 points to 44,458.61, the S&P 500 advance 72.31 points to 6,445.76, and the Nasdaq composite jump 296.50 points to 21,681.90.
The S&P 500 increased 1.1 percent to surpass its all-time high set two weeks earlier, while the Nasdaq gained 1.4 percent to set its own record, reported by The Canadian Press.
Nia noted that the US inflation report boosted the odds of multiple rate cuts this year, though he cautioned that valuations remain high, markets are “priced for perfection,” and September is historically a weaker month.
He added that while the probability of a US recession over the next six months remains low, short-term caution may be warranted.
As per The Canadian Press, Nia said Chinese tariffs on Canadian canola—announced at 75.8 percent following an anti-dumping investigation—are unlikely to affect the TSX.
He pointed to financials, gold, and Shopify as the main performance drivers rather than agriculture.
On Tuesday, the Canadian dollar closed at 72.60 cents US, crude oil fell 79 cents US to US$63.17 per barrel, and gold declined US$5.70 to US$3,399 an ounce.
The momentum carried into Wednesday, with the S&P/TSX composite index gaining another 72.17 points to 27,993.43, according to BNN Bloomberg.
Consumer cyclicals led the advance as US markets also extended their gains.
The Dow Jones industrial average added 463.66 points to 44,922.27, the S&P 500 rose 20.82 points to 6,466.58, and the Nasdaq composite increased 31.24 points to 21,713.14.
BNN Bloomberg reported that the US rally followed a global lift in equity markets.
Asian indexes surged in their first trading session after Tuesday’s US inflation release—Hong Kong’s Hang Seng gained 2.6 percent, Japan’s Nikkei 225 rose 1.3 percent, and South Korea’s Kospi climbed 1.1 percent—while Germany’s DAX and France’s CAC 40 each added 0.7 percent.
On Wall Street, homebuilders were among the top gainers on Wednesday, with PulteGroup up 5.4 percent and Lennar advancing 5.2 percent on expectations that lower rates could boost mortgage demand.
Other notable moves included Brinker International up 1.6 percent on stronger quarterly earnings, HanesBrands rising 3.7 percent after agreeing to be acquired by Gildan Activewear for US$2.2bn, and Bullish surging 83.8 percent in its New York Stock Exchange debut.
Losses came from grocery and delivery companies after Amazon announced an expansion of same-day fresh grocery delivery to over 1,000 locations, with Kroger falling 4.4 percent and DoorDash down 3.8 percent.
Cava Group dropped 16.6 percent on weaker-than-expected revenue, and CoreWeave slid 20.8 percent after reporting a larger loss than forecast.
In commodities, Wednesday saw the Canadian dollar trade at 72.64 cents US, crude oil decline 52 cents US to US$62.65 per barrel, and gold rise US$9.30 to US$3,408.30 an ounce, as per BNN Bloomberg.
In the bond market, the 10-year US Treasury yield fell to 4.23 percent from 4.29 percent as expectations solidified for a September rate cut.
Economists expect wholesale inflation data due Thursday to show a slight rise to 2.4 percent in July from 2.3 percent in June.
