TORONTO – The Toronto stock market kicked off a shortened holiday trading week with a modest gain Tuesday, while Wall Street soared on signs that strength is continuing to build in the U.S. economy.
On Bay Street, the S&P/TSX composite index climbed 33.27 points to 13,952.85, lifted by the financials and consumer staples sectors.
The Big Five Canadian banks are reporting their latest financial results this week, with the Bank of Montreal (TSX:BMO) up first on Wednesday. TD Bank (TSX:TD), CIBC (TSX:CM) and Royal Bank (TSX:RY) will report Thursday , while Scotiabank (TSX:BNS) is set to release its earnings next week.
The rally joined a global uptick in bank stocks, with American bank issues rising as the yield on the 10-year U.S. Treasury notes rose to 1.86 per cent from 1.84 per cent. When interest rates go up, as they have been recently, banks can make more money from lending.
The positive sentiment helped stock markets in New York, which rebounded strongly from a small pullback Monday. The Dow Jones industrial average shot up 213.12 points to 17,706.05, while the broader S&P 500 rose 28.02 points to 2,076.06.
The Nasdaq composite added 95.28 points to 4,861.06, encouraged by gains in big name tech stocks like Apple (Nasdaq:AAPL), Google parent Alphabet (Nasdaq:GOOGL) and Microsoft (Nasdaq:MSFT).
Markets were also buoyed by data from the U.S. Commerce Department that said sales of new homes reached their highest level in eight years in April.
The report helped spur speculation that indications are strong enough for the U.S. Federal Reserve to raise interest rates as early as next month.
At first, Wall Street saw a potential rate hike as a negative because low interest rates have been credited with fuelling the rally in stock markets since the Great Recession. But now, some see a hike as a sign that the economy is faring well in terms of employment and consumer spending, which will help corporate balance sheets sooner rather than later.
“The market has gone from expecting the Fed not to hike to . . . realizing the Fed was closer to hiking than what had been expected,” said Scott Vali, vice-president of equities at CIBC Asset Management.
“It (interest rate considerations) will continue to add volatility in the summer as we move forward,” Vali said.
The upside in equities has weighed on gold prices, with June gold down US$22.30 at US$1,229.20 a troy ounce.
In other commodities, the July contract for benchmark North American crude rose 54 cents to US$48.62 a barrel, while July natural gas fell five cents to US$2.15 per mmBtu. July copper added a penny to US$2.07 a pound.
Meanwhile, the Canadian dollar was down 0.13 of a U.S. cent at 76.07 cents U.S., adding to last week’s four-day slide heading into the Victoria Day holiday weekend.
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