Canada's main stock index gained a hundred points Thursday led by strength in the energy and base metals sectors, while U.S. stock markets also climbed higher.
The S&P/TSX Composite Index closed up 100.01 points, or 0.51 per cent, at 19,672.25, with the energy index up more than one per cent as the price of oil went back above US$70 a barrel.
In New York, the Dow Jones Industrial Average was up 153.30 points at 33,061.57. The S&P 500 Index was up 41.19 points at 4,221.02, while the Nasdaq Composite was up 165.70 points at 13,100.98.
With the clock ticking, the U.S. Senate is dashing to finish up the debt-ceiling bill after it passed in the House Wednesday night.
Though the uncertainty amid ongoing talks had weighed on markets, investors are focusing on other things, said Tamsin Wilding, fixed income analyst at Leith Wheeler.
“I think that’s starting to fade into the background now as we move past that,” said Wilding.
What is front and centre now is the discussion about whether the Federal Reserve is going to pause rates at its next meeting, she said.
Recent economic data releases have had investors increasingly eyeing a potential hike despite earlier expectations of a pause.
But Fed officials have been signalling there’s no increase in the cards at the June meeting, with one governor saying that skipping a rate hike at the coming meeting would allow policymakers to see more economic data come through before making decisions.
With those comments, the market is starting to cool its expectations a little, said Wilding.
“The discussion is really, how do they pause?” she said. “Do they outright pause here, or do they move to a skip meeting, and maybe hike every second meeting from here on in?”
The market is now pricing in a 25 per cent chance of a hike in June, down from earlier expectations, and a 60 per cent chance for July, said Wilding.
The tech sector outperformed the market again Thursday, which Wilding attributed to a start-of-the-month boost as well as talk of an interest rate pause for June.
Meanwhile in Canada, markets still expect a pause in June but are pricing in one more hike by September, she said.
In the latest round of economic data south of the border, U.S. jobless claims ticked higher last week, while manufacturing continued to slow in May.
“I think you would expect to see that industrial sector lead the slowdown, particularly after that excess goods demand we saw through COVID,” said Wilding.
However, Wilding said investors will be more interested in jobs data coming Friday and services data coming Monday ahead of the Fed meeting in just under two weeks.
The Canadian dollar traded for 74.17 cents U.S. compared with 73.51 cents U.S. on Wednesday.
The July crude contract was up US$2.01 at US$70.10 per barrel and the July natural gas contract was down 11 cents at US$2.16 per mmBTU.
The August gold contract was up US$13.40 at US$1,995.50 an ounce and the July copper contract was up seven cents at US$3.71 a pound.
— With files from The Associated Press
This report by The Canadian Press was first published June 1, 2023.