Toronto Stock Exchange hits four-week high, sees gains across sector

What is going on here?

Toronto Warehouse The S&P/TSX stock index rose 0.02% to 22,227.18 points, hitting a four-week high, with all sectors gaining.

What does it mean?

While the gains are modest, it is significant that all eleven major Canadian sectors are in the black. Communication services led the pack with a 0.9% gain, followed by the materials sector, which rose 0.1%, supported by gold prices hitting near two-week highs. Investors are now eagerly awaiting U.S. nonfarm payrolls data, which will provide clues about the future of the Federal Reserve interest interest rate decisions. Despite the fall in Canada’s services PMI to a three-month low in June, an easing inflation pressure was a silver lining. The market is currently betting on a Federal Reserve rate cut in September (72.5% chance), with a 41.8% chance of a Bank of Canada rate cut this month.

Why should I care?

For markets: Looking at interest rates and economic indicators.

The push for potential rate cuts is a positive sign for sectors like resources, but there’s a catch. Investment adviser BlueShore Financial warns the Fed is unlikely to cut rates prematurely, with the goal of keeping inflation at a 2% target. With U.S. markets closed for Independence Day, Canadian investors are focused on upcoming U.S. jobs data to anticipate the Fed’s next move.

Bigger picture: Consequences of cutting interest rates.

Interest rate cuts could boost stock markets and make borrowing cheaper, potentially boosting economic growth. But if they come too soon, they could reignite inflation. With key data coming out of the U.S. and notable events like a management change at goeasy Ltd., investors are navigating a complex landscape. Despite these headwinds, the overall sentiment remains cautiously optimistic.