Canada’s resource-heavy index rose on Friday, as a gain in mining stocks, on higher copper prices, helped limit the impact from U.S. producer prices data that came in hotter than expected, pushing back speculations of early interest rate cuts.
At 11:18 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was up 79.97 points, or 0.37%, at 21,301.66.
The index is on track for weekly gains, snapping a two-week losing streak.
Materials-linked stocks were set to extend gains to the third consecutive session, with a 1.2% rise.
Shares of miners Ero Copper and Lundin Mining rose 6.2% and 5.3%, respectively, amongst mining stocks as copper prices were on track to log their biggest weekly gain in seven months.
Rate-sensitive technology sector declined 1.0%, and was on track to be the worst-performing sector in the week.
Energy sector traded almost flat, but could be the best weekly performer if gains hold.
U.S. producer prices increased more than expected in January amid strong gains in the costs of services, stoking worries that inflation was picking up and tempering early rate cut hopes from the U.S. Federal Reserve.
“At the moment, inflation is a bit uncertain. But the market is still expecting that the Fed is going to start reducing rates around the middle of the year. That’s a reason why we’re not seeing a significant sell-off today”, said Mike Archibald, vice president and portfolio manager at AGF Investments.
“You should see a little bit of alterity today. This is the options expiry week in the U.S. and so it typically means a fair amount of trading occurs at the end of the trading day”, he added.
The yield on the Canadian benchmark 10-year bond rose, last standing at 3.58%, mirroring gains in its U.S. counterpart.
Among other stocks, shares of asset manager IGM Financial fell 4.8%, after the company reported its fourth-quarter results, while largest carrier Air Canada plummeted 5.8%, after it reported a wider-than-expected adjusted quarterly loss.
Canada markets will be closed on Monday on account of Family Day.
Another hotter-than-expected update on inflation is keeping U.S. stocks in check on Friday.
The S&P 500 was down 0.3% in morning trading after setting an all-time high the day before. The Dow Jones Industrial Average was 87 points lower, or 0.2%, and the Nasdaq composite was down 0.7%.
Friday’s report on inflation at the wholesale level was the latest reminder that the battle against rising prices still isn’t over. Prices rose more in January than economists expected, and the numbers followed a similar report from earlier in the week that showed living costs for U.S. consumers climbed by more than forecast.
Treasury yields rose in the bond market immediately after the report’s release. The data kept the door closed on hopes that the Federal Reserve could begin cutting interest rates in March, as traders had earlier hoped. It also discouraged bets that a Fed move to relax conditions on the economy and financial markets could come even in May.
The yield on the 10-year Treasury climbed to 4.30% from 4.24% late Thursday, and it earlier neared its highest level since November. Higher rates and yields make borrowing more expensive, which tighten the brakes on the economy and hurt prices for investments.
Still, the recalibrated bets for cuts to rates have simply brought Wall Street’s forecasts closer to what the Federal Reserve has been outlining. Critics have been saying traders’ expectations had gone overboard in how quickly and how much the Fed could cut rates in 2024. The expectation for the Fed’s next move is still for a cut to its main interest rate, which is at its highest level since 2001, as it’s said it likely will do.
In the meantime, the hope is that the economy continues to remain solid despite high interest rates.
A preliminary report on Thursday suggested that sentiment among U.S. consumers is still rising, though not by quite as much as economists hoped. That’s key because spending by consumers makes up the bulk of the economy. In one potentially discouraging signal, the report from the University of Michigan also said that expectations for inflation in the coming 12 months ticked up to 3% in February from 2.9% in January.
If the economy does remain resilient, it would allow companies to deliver growth in profits.
Applied Materials climbed 6.7% after it reported stronger profit for the latest quarter than analysts expected. The company designs and manufactures systems used to fabricate semiconductor chips, and it’s benefiting from the frenzy underway for artificial-intelligence technology.
Cryptocurrency company Coinbase Global leaped 11.5% after it reported much better results than forecast. Higher crypto prices helped drive more transaction revenue for the company.
On the losing end was Digital Realty, which sank 6.7%. The owner of data centers reported weaker results than expected.
In stock markets abroad, indexes climbed across much of Europe and Asia.
In Japan, Tokyo’s Nikkei 225 rose 0.9% and got close to its record high set at the end of 1989. That was just before Japan’s “bubble” economy burst as stock and real-estate prices plunged.
Japanese stocks have been rising even though its economy has shrunk to become the world’s fourth-largest.
Reuters and The Associated Press
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2024-02-16 10:35:34Z
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