North American markets enjoyed a broad rally on Friday, buoyed by two encouraging US markets. inflation reports earlier in the week and the lack of other major economic news on the day to offset them.
With a near total absence of market-moving events on what was a quiet day before a summer weekend, the S&P/TSX Composite Index still gained 187.93 points to close at 20,179.81.
In New York, the Dow Jones Industrial Average closed up 424.38 points at 33,761.05. The S&P 500 index closed up 72.88 points at 4,280.15, while the Nasdaq Composite gained 267.28 points to close at 13,047.19.
“There has been almost no news today so it appears to be mostly momentum trading,” said Colin Cieszynski, chief market strategist at SIA Wealth Management. “The TSX has had a very good week, the US market has had a very good week, and investors continue to come back into the market.”
The S&P/TSX Composite has been on the upside since the release of US consumer inflation data for the month of July earlier this week. Both that report and a subsequent one on U.S. wholesale inflation showed month-over-month inflation rate declines and investors appear to be taking that as an indication that the most significant cost-of-living increases have already reached their peak. Maximum point.
In fact, Cieszynski said equity markets now seem confident on the premise that central banks are prepared to slow or stop interest rate increases altogether. He said that is somewhat odd, given that inflation remains well above central banks’ target rate and central bankers themselves have made no public comment indicating they are willing to scale back their efforts to rein in the overheated economy. .
“So in many ways this rally seems to have taken on a life of its own. Even when we have negative news, the markets don’t seem to respond to that at all,” Cieszynski said. “It just seems to be a relief rally that continues to spread.”
While equity markets rallied on Friday, there was some weakness on the commodity side. The September crude contract was down $2.25 at $92.09 a barrel and the September natural gas contract was down 11 cents at $8.77.
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The relatively high weighting of S&P/TSX energy stocks is the main reason the index lagged behind US markets a bit on Friday, Cieszynski said, though even the Canadian energy sector managed to end the day in lower territory. modestly positive in the context of a broader-based rally. .
The December gold contract was up $8.30 at $1,815.50 an ounce and the September copper contract was down almost four cents at $3.67 a pound.
The Canadian dollar traded at 78.23 US cents compared to 78.41 US cents on Thursday.
While Friday was relatively uneventful, the week ahead is expected to be busy with retail numbers expected from Canada, the US, UK and China, Cieszynski. Earnings are also expected from major US retailers including Walmart and Home Depot.
July housing market reports for Canada and the US will also be released next week.
Statistics Canada is scheduled to release its July inflation report for the country on August 16 ahead of the Bank of Canada’s next rate decision set for September 7. Analysts believe the Bank of Canada will then decide between a half percentage point increase or a three quarter percentage point increase.
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