TORONTO — Canada's main stock index moved higher Wednesday after the Bank of Canada announced a highly anticipated interest rate cut, while U.S. markets rallied, with the Nasdaq gaining almost two per cent.
The S&P/TSX composite index closed up 166.84 points at 22,145.02.
In New York, the Dow Jones industrial average was up 96.04 points at 38,807.33. The S&P 500 index was up 62.69 points at 5,354.03, while the Nasdaq composite was up 330.86 points at 17,187.90.
The Bank of Canada cut its key interest rate by a quarter-percentage-point to 4.75 per cent, a move that was widely expected by market watchers.
Economic data has been showing continued signs of cooling under the weight of higher interest rates, which were near zero in early 2022 before the central bank began hiking to try and curb inflation.
Governor Tiff Macklem indicated the central bank is gaining confidence that inflation is on the right path.
“If inflation continues to ease, and our confidence that inflation is headed sustainably to the two per cent target continues to increase, it is reasonable to expect further cuts to our policy interest rate,” Macklem said in remarks prepared for a morning news conference.
Though the cut itself was largely expected, the central bank’s commentary was more dovish than anticipated, said Rose Devli, portfolio manager at 1832 Asset Management.
“It was supposed to be a hawkish cut, but it sounded to be more of a dovish cut,” she said.
“So that kind of sparked this interest rate dive and not only in Canada, but kind of globally because (the European Central Bank) is set to cut rates tomorrow.”
The Bank of Canada was the first central bank in the G7 to cut rates. It was also a leader in initiating a hiking cycle in the first place, added Devli.
It’s a different story in the U.S., where surprising resilience in the economy has forced market watchers to push back their expectations for cuts in 2024. The U.S. Federal Reserve is not expected to start cutting until the fall.
On Wednesday, the S&P 500 and Dow rose to new heights, led by technology stocks amid the ongoing artificial intelligence frenzy on Wall St. For Nvidia, a key stock in the AI rally, it was a particularly big day as the firm’s total market value crested US$3 trillion for the first time.
Other big tech stocks leading the market higher included Microsoft and Meta.
U.S. market watchers got some mixed data on the economy Wednesday, with one report showing the services sector beat growth forecasts last month. Another report from the Institute for Supply Management said prices rose at a slower pace in May than the month before, while a third report suggested non-government hiring slowed last month by more than expected.
The Canadian dollar traded for 73.01 cents US compared with 73.09 cents US on Tuesday.
The July crude oil contract was up 82 cents at US$74.07 per barrel and the July natural gas contract was up 17 cents at US$2.76 per 1,000 cubic feet.
The August gold contract was up US$28.10 at US$2,375.50 an ounce and the July copper contract was up seven cents at US$4.61 a pound.
-- With files from The Associated Press
This report by The Canadian Press was first published June 5, 2024.
Companies in this story: (TSX:GSPTSE, TSX:CADUSD)
Rosa Saba, The Canadian Press
