TORONTO – Signals that the U.S. Federal Reserve still plans on raising interest rates helped boost stock markets in Toronto and New York on Monday, with the S&P 500 index closing at its highest level so far this year.
On Wall Street, bourses stayed solidly in positive territory as Fed chair Janet Yellen hinted in a speech to the World Affairs Council in Philadelphia that a rate hike for this summer continues to be on the table.
The broader S&P 500 composite index climbed 10.28 points to 2,109.41 — its highest close since Nov. 3, while the Dow Jones industrial average was up 113.27 points at 17,920.33. The tech-heavy Nasdaq composite added 26.19 points to 4,968.71.
Until last Friday, most investors had expected the U.S. central bank to raise interest rates as early as this month, but after a surprisingly weak May jobs report, many are unsure of the Fed’s intentions.
Yellen downplayed the latest release by cautioning that one weak economic report does not necessarily reverse the Fed’s view on the schedule it wants to keep for raising interest rates.
The Fed raised its key policy rate in December for the first time in nearly a decade, pushing the rate from a record low near zero to a range of 0.25 per cent to 0.5 per cent.
Yellen’s statements are her last publicly scheduled comments before Fed policy-makers meet next week.
“Her comments were really aimed at trying to create a little bit of balance,” said Craig Fehr, a Canadian markets strategist with Edward Jones in St. Louis.
“It continued to nod to the fact that they are going to continue to take a cautious and slow approach to rate hikes. But I think the Fed also is intent on starting to condition the market towards the idea that rate hikes are coming, if indeed the economic data continues to come in fairly strong fashion as it has over the past several weeks.”
In Toronto, the S&P/TSX composite index climbed 49.38 points at 14,276.16, with metals and energy stocks being the biggest gainers. Gold was the biggest decliner on the commodity-heavy index.
The July crude contract added $1.07 at US$49.69 per barrel, pressured by a worsening situation in Nigeria, which continues to face militant attacks on its pipeline infrastructure.
Supply disruptions from Nigeria and the wildfires north of Fort McMurray, Alta., have helped spur the recent rise in oil prices.
Rising crude helped lift the loonie as the Canadian dollar gained 0.82 of a cent to 78.08 cents US.
Fehr said investors can expect the currency to weaken in the near future, especially once GDP figures are released showing the economic impact of the fires in Alberta.
“I think the economic picture isn’t bleak in Canada but growth will remain subdued, if not sluggish for a while longer,” he said.
In other commodities, August bullion rose $4.50 to US$1,247.40 an ounce.
July natural gas jumped seven cents at US$2.47 per mmBTU and July copper contracts were unchanged at US$2.12 a pound.
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