TORONTO — Canada's main stock index rose almost 350 points Thursday, powered by a broad-based rally on the Toronto market, while U.S. stocks also surged higher.
“It has been a wild week,” said Ashish Utarid, assistant vice-president of investment strategy with IG Wealth Management.
Stocks slid on Monday, reacting to weaker-than-expected U.S. labour market data. A rate hike by the Bank of Japan also sent shockwaves worldwide as investors sold off stocks to try and mitigate risks from investments made using cheaply financed funds borrowed mainly in yen.
U.S. markets recovered some of their ground Tuesday before leaning back into the red on Wednesday.
But Thursday saw a continuation of markets reversing Monday’s selloff, resulting in the week — so far — being basically “a blip,” said Utarid. In fact, it was the S&P 500’s best day since 2022, as the index jumped 2.3 per cent while the Nasdaq climbed 2.9 per cent and the Dow was up 1.8 per cent.
"At the end of the day, what we saw was potentially the appropriate response. The unwinding of the trades was taken away from companies that had seen very high valuations, excess returns over the last 12 months," he said.
In New York on Thursday, the Dow Jones industrial average was up 683.04 points at 39,446.49. The S&P 500 index was up 119.81 points at 5,319.31, while the Nasdaq composite was up 464.22 points at 16,660.02.
The S&P/TSX composite index closed up 344.66 points, or 1.6 per cent, at 22,225.61.
Recent employment data has shown slowness in the labour market, which is what central banks are trying to achieve, said Utarid.
“There's going to be an adjustment period, and that is exactly what that higher interest rate was designed to do,” he said.
In the U.S., where the central bank is expected to start cutting interest rates in September, the next eight weeks will be key to understanding the trajectory of economic data, he said.
“We’re headed to normalization of rates, we're heading into normalization in the unemployment rate, and we're heading into normalization of steady job growth.”
Some in the market are betting the U.S. Federal Reserve could even cut by 50 basis points in September, but Utarid thinks that would be an overreaction from the central bank.
Earnings for the second quarter have been largely good so far, he said, with consumers appearing relatively resilient despite a slowing economy.
The Canadian dollar traded for 72.76 cents US compared with 72.79 cents US on Wednesday.
The September crude oil contract was up 96 cents at US$76.19 per barrel and the September natural gas contract was up two cents at US$2.13 per mmBTU.
The December gold contract was up US$30.90 at US$2,463.30 an ounce and the September copper contract was up a penny at US$3.96 a pound.
— With files from The Associated Press
This report by The Canadian Press was first published Aug. 8, 2024.
Companies in this story: (TSX:GSPTSE, TSX:CADUSD)
Rosa Saba, The Canadian Press
