Canada’s main stock index hit a new record high on Thursday, as the latest U.S. inflation data did little to shift expectations that an interest rate cut by the U.S. Federal Reserve is likely next week.
The Toronto Stock Exchange’s S&P/TSX composite index was up 0.6 per cent at 29,352.92 points, eclipsing previous session’s record level.
Data showed on Thursday that U.S. consumer prices rose more than expected in August, but a surge in first-time applications for unemployment aid last week kept the Fed on track to cut interest rates next Wednesday.
This follows the recent economic indicators that have showed continued labor market weakness, which prompted traders to fully price in at least a 25-basis-point rate cut at the Fed’s September 16–17 meeting.
Pricing now reflects bets on three straight quarter-point cuts, one at each meeting left this year.
“The Fed is going to focus on the weakness in jobs above the inflation and they will cut rates,” said Allan Small, senior investment advisor of the Allan Small Financial Group with iA Private Wealth.
“The Bank of Canada is going to have to follow along with the Fed …. the BoC should be even more aggressive because they (Fed) have perhaps an inflationary issue, a small one, and we don’t have one at all.”
Odds that the BoC will resume its easing cycles have supported market sentiment since last Friday, following disappointing jobs data in Canada.
Money markets expect an 81 per cent chance of a 25 basis-point interest-rate cut by the BoC on September 17, according to data compiled by LSEG.
TSX’s consumer discretionary subindex led sectoral gains on Thursday, climbing 1.4 per cent after Magna International rose 2.1 per cent. The Canadian auto parts supplier said on Thursday it had appointed Philip D. Fracassa as its new Chief Financial Officer.
Rate-sensitive real estate stocks rose 1.3 per cent.
Wall Street is ticking toward more records on Thursday following mixed U.S. data that likely keeps the path clear for the Federal Reserve to cut interest rates in order to boost the economy.
The S&P 500 rose 0.4 per cent and was on track to set an all-time high for a third straight day. The Dow Jones Industrial Average was up 371 points, or 0.8 per cent, and the Nasdaq composite was 0.4 per cent higher.
Treasury yields swiveled a couple times in the bond market but ultimately eased following the economic reports, which Wall Street took as cementing the case for a cut to rates at the Fed’s meeting next week.
One of the reports said more U.S. workers applied for unemployment benefits last week, an indication that the number of layoffs could be rising. It’s the latest discouraging signal on the job market, where hiring has slowed substantially. The labor market had seemed to be settling into a low-hire, low-fire state, but an increase in layoffs could put it in an even tighter vise.
The hope on Wall Street has been for a slowdown, but only for a precisely measured one. The job market has to be worrying enough to get the Fed to cut interest rates, which can give a kickstart to the economy and to prices for investments, but not so weak that it causes a recession.
The Fed has been hesitant to cut interest rates throughout 2025 because of the threat that President Donald Trump’s tariffs could make inflation worse. That’s because lower interest rates can push inflation even higher.
A report on inflation Thursday showed prices are continuing to rise faster for U.S. households than the Fed hopes, but only by the amount that economists expected. Consumers paid prices for food, gasoline and other costs of living that were 2.9 per cent higher in August than a year earlier, a slight acceleration from July’s 2.7 per cent inflation rate.
That’s above the Fed’s target of 2 per cent, but traders believe not by enough to convince the Fed that inflation is the bigger problem now for the economy than the slowing job market. The Fed has just one tool to fix both problems, and moving interest rates to help one often hurts the other in the short term.
“Right now, inflation is a key subplot, but the labor market is still the main story,” according to Ellen Zentner, chief economic strategist for Morgan Stanley Wealth Management.
On Wall Street, Centene helped lead the market with a jump of 12 per cent. The health care company said its business results through August are tracking with the profit forecast it had earlier given for the year. That’s more than analysts are forecasting.
Opendoor Technologies soared 48 per cent after the company, which helps people buy and sell homes online, said it hired Shopify’s chief operating officer, Kaz Nejatian, as its CEO. It also announced a $40 million investment in the company by one of its founders and an investment firm tied to another founder.
Kroger was flipping between gains and losses after the grocer reported a stronger profit for the latest quarter than analysts expected, though its revenue came up just shy of forecasts. It also raised the bottom end of its forecasted range for profit over the full year. Its stock was most recently down 0.1 per cent.
Oracle fell 3.8 per cent to give back some of its monster surge from the day before, when it soared nearly 36 per cent for to its best day since 1992 on excitement about multibillion contracts it had signed related to artificial-intelligence technology.
In stock markets abroad, European indexes ticked higher after the European Central Bank left interest rates unchanged at its latest meeting. The European bank is on pause following an earlier set of cuts, and its president, Christine Lagarde, said future moves are “not on a predetermined path.”
France’s CAC 40 rose 0.9 per cent, and Germany’s DAX returned 0.2 per cent.
In Asia, indexes were mixed. Stocks jumped 1.7 per cent in Shanghai but fell 0.4 per cent in Hong Kong.
In the bond market, the yield on the 10-year Treasury eased to 4.01 per cent from 4.04 per cent late Wednesday.
Reuters and The Associated Press