The Canadian stock index experienced a boost on Wednesday, driven by the strength of battery metals. This broad-based strength in Canadian equities, along with a rise in U.S. markets, contributed to the positive performance. After a surge in big-tech stocks in the first half of the year, there is now an opportunity for the TSX to make up ground in the second half, according to Brianne Gardner, Senior Wealth Manager of Velocity Investment Partners at Raymond James Ltd. Gardner believes that financials can withstand the current market conditions better than anticipated and sees potential for growth in the energy sector. Comparatively, she states that the TSX has more room to grow than the S&P 500. The S&P/TSX composite index saw a gain of 114.60 points, reaching 20,491.17.
In New York, the Dow Jones industrial average increased by 109.28 points, closing at 35,061.21. The S&P 500 index rose by 10.74 points, ending at 4,565.72, and the Nasdaq composite saw a small gain of 4.38 points, reaching 14,358.02. Gardner notes that second-quarter earnings in the U.S. have exceeded low expectations, providing investors with hope for a soft landing. While the market still anticipates a rate hike by the Federal Reserve, recent economic data showcasing the resilience of the economy in the face of higher rates has increased expectations for earnings. Despite inflation and a weakening consumer, many companies are surpassing estimates. This has led to a shift in investors’ views towards a more resilient economy.
Gardner explains that as inflation continues to decrease without a significant increase in unemployment, investors are becoming more confident in the durability of the economy. However, she acknowledges concerns regarding Canadians’ high debt levels and their ability to handle higher interest rates. While Gardner believes that a recession may be necessary as part of the business cycle, she suggests that the current state of affairs is more positive than negative.
The Nasdaq experienced minimal growth compared to other indexes on Wednesday. Gardner suggests that the upcoming rebalance of its Nasdaq-100 Index at the end of the week may be prompting some investors to take profits from the tech rally. The performance of the Nasdaq has been heavily influenced by big tech names such as Microsoft, Nvidia, and Apple. Gardner explains that the rebalance will reduce the weight of the index’s largest holdings and increase the weights of other stocks. This alteration may impact the markets as indices trim back on certain stocks and increase investments in those that have not participated as greatly in upward trends. The Canadian dollar traded for 75.93 cents US, while the September crude oil contract saw a decrease of 37 cents, settling at US$75.29 per barrel. The August natural gas contract was down three cents at US$2.60 per mmBTU. The August gold contract remained unchanged at US$1,980.80 per ounce, and the September copper contract decreased by two cents to reach US$3.81 per pound.
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