S&P/TSX composite up by Monday close, U.S. stock markets also up

TORONTO -

Canada's main stock index was up Monday, continuing Friday's rally, while U.S. markets were also up.

The S&P/TSX composite index was up 57.45 points at 18,918.40.

In New York, the Dow Jones industrial average was up 417.06 points at 31,499.62. The S&P 500 index was up 44.59 points at 3,797.34,while the Nasdaq composite was up 92.89 points at 10,952.61.

There's a lot of hope that the Fed's aggressive rate hike cycle is coming close to an end, said Lyle Stein, president of Forvest Global Wealth Management Inc.

The Bank of Canada is widely expected to announce another oversized rate hike Wednesday.

Canada is in a more precarious position than the U.S. due to its sensitivity to the housing market, said Stein. A 50-point hike this week risks being too little to curb imported inflation, and a 75-point hike risks damaging the housing market.

"We're in a bit of a pickle here."

BMO economist Priscilla Thiagamoorthy said in a note Monday that with Canadian consumer prices climbing 6.9 per cent in September and grocery prices up 11.4 per cent year over year, BMO expects another 75-point hike.

Data on Monday morning showed that aggressive central bank tightening is beginning to take its toll, said Candice Bangsund, vice-president and portfolio manager for Fiera Capital, in an email.

She said investors got some reprieve with reports last week that the Fed was contemplating a smaller rate hike in December after the expected 75-basis-point hike in November.

Stein said a wave of earnings this week, including some of the biggest tech companies, is coming this week. It will make clearer the effect of inflation and central bank tightening on companies, he said.

"This will be the most important thing over the course of the next week," he said.

The December crude oil contract was down 47 cents at US$84.58 per barrel and the December natural gas contract was up 28 cents at US$5.75 per mmBTU.

Crude oil slipped lower Monday on economic data in China that revealed a mixed outlook for growth and energy demand, said Stein.

The Canadian dollar followed suit, alongside a stronger U.S. dollar as concerns about the Chinese economy sent investors "flocking to the safe haven currency," Bangsund said.

The Canadian dollar traded for 72.88 cents US, compared with 72.92 cents US on Friday.

Thiagamoorthy noted that the Biden administration is reportedly planning to release 10 to 15 million barrels of crude from the Strategic Petroleum Reserve to try and lower oil prices.

The December gold contract was down US$2.20 at US$1,654.10 an ounceand the December copper contract was down 4.4 cents at US$3.43 a pound.

This report by The Canadian Press was first published Oct. 24, 2022.