North American markets moved higher Monday after the U.S. and Mexico announced they had reached a preliminary trade accord, prompting the S&P 500 and the Nasdaq composite to set new all-time highs.
Investors took a collective sigh of relief that the prospective deal signalled that trade disagreements don’t have to end in aggressive protectionist actions, said Craig Fehr, Canadian markets strategist for Edward Jones.
“If the market at certain periods over the past couple of months had been expecting these tariffs negotiations to result in an outright global trade war, this is at least some confirmation that some fruitful deals can potentially be reached,” he said in an interview.
Fehr said investors are probably leaping to the conclusion that a concrete deal is forthcoming despite hurdles that still need to be overcome.
“There’s a lot of mechanics that are going to have to take place before the market can declare victory that the trade war is over.”
In New York, the Dow Jones industrial average advanced 259.29 points at 26,049.64.
The S&P 500 index gained 22.05 points to 2,896.74 after reaching a high of 2,898.25. The Nasdaq composite surpassed 8,000 for the first time, gaining 71.92 points to 8,017.89 after reaching 8,024.94 in earlier trading.
The S&P/TSX composite index rose 88.34 points to 16,444.39, after touching a high of 16,475.34 on 213.9 million shares trading.
The increase reflects relief that perhaps an agreement won’t be categorically negative for Canada, specifically for the automotive sector, said Fehr.
“At the end of the day this probably signals that the expectations prior to today were more pessimistic than the read through from today’s U.S.-Mexico deal.”
The consumer discretionary sector was the second strongest sector. It closed up 1.45% as shares in Canadian auto parts companies like Linamar Corp., Magna International Inc. and Martinrea International Inc. rose as much as 6.6% on the day.
All sectors but utilities closed up. Healthcare gained 3.1%, led by continued share increases by cannabis companies Aphria Inc. and Canopy Growth Corp.
The Canadian dollar traded higher at US77.01¢ compared with an average of US76.71¢ on Friday.
Fehr said it’s not surprising that the S&P 500 and Nasdaq reached new highs given that U.S. economic growth has been solid and second-quarter corporate profits were exceptional.
However, he doesn’t see things being as smooth for the rest of the year even though he sees equities continuing to increase.
The October crude contract was up US15¢ at US$68.87 per barrel and the October natural gas contract was down US4.4¢ at US$2.869 per mmBTU.
The December gold contract rose US$2.70 at US$1,216 an ounce and the September copper contract was upUS 0.8¢ at US$2.708 a pound.