Toronto’s main stock index continued to push higher Thursday as Wall Street veered lower on heightened interest rate expectations from the U.S. Federal Reserve.
The S&P/TSX composite index climbed 65.32 points to 15,454.92, with rising energy and financials shares among the key gainers.
Following Wednesday’s announcement that the Fed remains on course to raise rates one more time this year and three times in 2018, interest-sensitive names on the TSX have benefited, said portfolio manager Kash Pashootan.
“Banks stocks are having a good couple of days here given that higher interest rates help their net interest margins,” said Pashootan, who works at First Avenue Advisory, a Raymond James company.
“So although the announcement came from the U.S. it had a spillover effect in Canada.”
South of the border, banks and industrials were among the few bright spots on U.S. stock indexes as modest gains from a day earlier were wiped out.
The Dow Jones industrial average was down 53.36 points to 22,359.23. The S&P 500 index lost 7.64 points to 2,500.60 and the Nasdaq composite index gave back 33.35 points to 6,422.69.
“You’re seeing a hangover effect from yesterday’s Federal Reserve meeting and comments,” said Pashootan. “Really, the take away of course is that if there were any doubts that rates were going to continue to rise, that’s been removed off the table.”
As a result, he said, that’s having a bullish effect on the U.S. dollar and putting downward pressure on the loonie.
The Canadian dollar was trading at an average price of US81.04¢, down 0.44 of a cent.
Pashootan said the fact that the market has been fairly boring and inactive in the United States “is a good thing because it’s taking the time needed to digest the news.”
“If you think about monetary policy in Canada compared to the U.S., it’s been quite different in the sense that the U.S. has done a better job at speaking ahead and preparing the markets for higher rates,” he said.
“The Bank of Canada didn’t prepare the markets as well in advance and you’ve seen the result of that in the Canadian dollar being up double digest in the last six months.”
In commodities news, the November crude contract shed US14¢ to US$50.55 per barrel and the October natural gas contract was down US15¢ to US$2.95 per mmBTU.
The December gold contract dropped US$21.60 to US$1,294.80 an ounce and the December copper contract declined US3¢ to US$2.93 a pound.