North American stock markets continue their generalized rally; weaker raw materials

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North American markets benefited from a broad-based rally on Friday, buoyed by two encouraging US inflation reports earlier in the week and the lack of other major economic news in the day to offset them.

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With an almost total absence of market disruptive events on a quiet day ahead of a summer weekend, the S&P/TSX Composite Index still gained 187.93 points to close at 20,179.81.

In New York, the Dow Jones Industrial Average closed up 424.38 points at 33,761.05. The S&P 500 index closed up 72.88 points at 4,280.15, while the Nasdaq composite gained 267.28 points to close at 13,047.19.

“There’s been hardly any news today, so it seems to be mostly momentum trading,” said Colin Cieszynski, chief market strategist at SIA Wealth Management. “The TSX had a very good week, the US market had a very good week and investors continue to come back into the market.”

The S&P/TSX Composite Index has been rising since US consumer inflation data for July was released earlier this week. This report, as well as a subsequent report on wholesale inflation in the United States, showed decreases in the rate of inflation on a month-over-month basis and investors seem to take this as an indication that the increases most important in the cost of living have already peaked.

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In fact, Cieszynski said stock markets now seem to be betting that central banks are poised to slow or halt interest rate hikes altogether. He said that was somewhat odd, given that inflation remains well above the central banks’ target rate and that central bankers themselves have not made any public comments indicating they are prepared to relax their efforts to slow the overheating economy.

“So in many ways this rally seems to have taken on a life of its own. Even when we have negative news, the markets don’t seem to react to that at all,” Cieszynski said. which continues to expand.

As the stock markets moved full speed ahead on Friday, there was some weakness on the commodities side. The September crude contract was down US$2.25 at US$92.09 a barrel and the September natural gas contract was down 11 cents at US$8.77.

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The relatively high weighting of S&P/TSX energy stocks is the main reason the index lagged U.S. markets on Friday, Cieszynski said, although even the Canadian energy sector managed to finish the day in slightly positive territory against the backdrop of a broader rally. .

The December gold contract was up $8.30 at US$1,815.50 an ounce and the September copper contract was down nearly four cents at US$3.67 per pound.

The Canadian dollar was trading at 78.23 cents US against 78.41 cents US on Thursday.

While Friday passed relatively uneventfully, next week should be loaded with expected retail sales figures from Canada, the United States, the United Kingdom and China, Cieszynski said. Earnings from major US retailers, including Walmart and Home Depot, are also expected.

The July housing market reports for Canada and the United States are also expected to be released next week.

Statistics Canada is expected to release its July inflation report for that country in August. 16 ahead of the Bank of Canada’s next rate decision on Sept. 7. Analysts estimate that the Bank of Canada will then decide between a hike of half a percentage point or a hike of three-quarters of a percentage point.

This report from The Canadian Press was first published on August 12, 2022.

Companies in this story: (TSX:GSPTSE, TSX:CADUSDX)

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