TORONTO — Broad-based strength among Canadian equities led by battery metals helped lift Canada's main stock index Wednesday, while U.S. markets also rose.
After a big-tech rally fuelled narrow gains in the first half of the year, there’s some room for the TSX to “make up” in the second half, said Brianne Gardner, senior wealth manager of Velocity Investment Partners at Raymond James Ltd.
“I think financials are able to weather the storm a little bit better than people have planned,” she said, noting there may also be room to the upside in the energy sector.
“I think that right now, I do see still more room to run with the TSX versus where the S&P 500 is sitting,” she said.
The S&P/TSX composite index was up 114.60 points at 20,491.17.
In New York, the Dow Jones industrial average was up 109.28 points at 35,061.21.The S&P 500 index was up 10.74 points at 4,565.72,while the Nasdaq composite was up 4.38 points at 14,358.02.
Second-quarter earnings in the U.S. have so far been beating low expectations, said Gardner, as investors increasingly see hope for a soft landing. While the markets are still pricing in a rate hike by the Federal Reserve next week, the bar is being raised a little for earnings with recent economic data showing the resilience of the economy amid higher rates, she said.
“Despite inflation, despite a little bit of a weakening consumer, there are still companies that are beating estimates,” she said.
“As we're seeing inflation continue to come down without the big rise in unemployment than many expected, I think we're seeing people's views and investors’ views shift to the likelihood of (a) more resilient economy.”
However, Gardner noted there’s still concern about Canadians’ high debt levels and the consumer’s ability to weather higher interest rates.
“Eventually, I feel like we need to go through a recession as part of the business cycle. But I think that right now, things are better than they are worse,” she said.
The Nasdaq lagged other indexes Wednesday, gaining just a handful of points.
The tech-heavy index is facing a rebalance of its Nasdaq-100 Index at the end of the week. This may be pushing some investors to profit-take on the tech rally ahead of the shift, said Gardner.
The concentration of big tech names like Microsoft, Nvidia and Apple have skewed the Nasdaq’s performance so far this year, Gardner said.
“The index is going to go through a special rebalance to reduce the weight of the index’s largest holdings and increase the weights of others,” she said.
“I think we're seeing some (exchange-traded funds) front-run that a little bit, but it will obviously impact markets when indices are having to trim back some of these stocks and increase their weights in some of the stocks that haven't participated on the upside.”
The Canadian dollar traded for 75.93 cents US, compared with 75.82 cents US on Tuesday.
The September crude oil contract was down 37 cents at US$75.29 per barrel and the August natural gas contract was down three cents at US$2.60 per mmBTU.
The August gold contract was unchanged at US$1,980.80 an ounceand the September copper contract was down two cents at US$3.81 a pound.
This report by The Canadian Press was first published July 19, 2023.
Companies in this story: (TSX:GSPTSE, TSX:CADUSD)
The Canadian Press
