Canada's main stock index rose almost 250 points in a broad-based rally Friday, ending the week on an upswing as Wall Street stocks also posted strong gains.
The S&P/TSX composite index was up 244.37 points at 20,581.58.
“It was a really nice day in Canada today,” said Colin Cieszynski, chief market strategist with SIA Wealth Management Inc.
He added that with crude oil rising more than 2.1 per cent on the day and gold also gaining ground, Canada’s resource-heavy TSX was bound to get a bump.
“A good day for miners, a good day for energy, is a good day for Canada," Cieszynski said.
The rally was the cherry on top of what was Bay Street's first week of gains after three straight weeks of losses. Last week in particular was a rough ride for Canadian equities, which saw their steepest losses since the start of 2023.
U.S. stocks also gained on Friday, with the Dow Jones industrial average up 387.40 points at 33,390.97. The S&P 500 index was up 64.29 points at 4,045.64, while the Nasdaq composite was up 226.03 points at 11,689.01.
Cieszynski said markets appear to be settling in after what was a swift rise and then a resulting fall in the first two months of the year.
Early in 2023, Wall Street had rallied on hopes that cooling inflation would get the Fed to take it easier on its hikes to interest rates. But last month, the rally went into reverse after several reports on the economy came in hotter than expected. They included data on the jobs market, consumer spending and inflation itself at multiple levels.
The strong data means investors have had to resign themselves to the likelihood of additional interest rate hikes by the U.S. Federal Reserve this year, Cieszynski said.
“It seems like people were kind of shocked at first, surprised if you will, and now people are getting more used to the idea again,” he said.
As proof that investors are settling into their newly adjusted expectations, the yield on the 10-year U.S. Treasury bond fell back to 3.96 per cent from 4.06 per cent late Thursday. It was a respite from its shot higher over the last month as expectations about a more hawkish Fed helped to hike bond yields.
“The U.S. treasury 10-year yield coming back under four per cent is helping the markets generally,” said Cieszynski.
Heading into next week, Cieszynski said investors will be watching the Bank of Canada's next interest rate announcement set for Wednesday, to see if it actually confirms a pause in rate hikes as expected.
"I suspect they will (pause)," he said.
"But the (question) then is what does that mean for the Canadian dollar, if the Bank of Canada pauses officially while the U.S. Fed is still raising rates?"
The other thing to watch next week, Cieszynski said, is fresh employment data coming from both the U.S. and Canada. The jobs market in recent months has remained consistently hotter-than-expected — and while that's great news for workers, it also suggests that central banks may not yet be willing to ease up on their efforts to curb inflation.
"That’s the next big economic indicator coming, and of course it's not just employment data, but everybody’s also watching wage inflation," Cieszynski said.
The Canadian dollar traded for 73.48 cents US compared with 73.45 cents US on Thursday.
The April crude contract was up $1.52 at US$79.68 per barrel and the April natural gas contract was up 24 cents at US$3.01 per mmBTU.
The April gold contract was up US$14.10 at US$1,854.60 an ounce and the May copper contract was down one cent at US$4.07 a pound.
This report by The Canadian Press was first published March 3, 2023.
— With files from The Associated Press
Companies in this story: (TSX:GSPTSE, TSX:CADUSD=X)
Amanda Stephenson, The Canadian Press
