S&P/TSX composite flat Friday, U.S. markets mixed as Dow posts new record

TORONTO — Canada's main stock index was essentially unchanged Friday, while U.S. markets were mixed to end the week, with the Dow eking out a new record high.

Markets were mixed Friday after a rally the day before that saw the S&P 500 and Dow reach new records.

The rally was in reaction to an outsized interest rate cut from the U.S. Federal Reserve on Wednesday. The Fed cut its key rate by half a percentage point, a highly anticipated move that was the central bank’s first cut since it hiked rates to fight inflation.

“The market is getting what it wants,” said Kevin Burkett, portfolio manager at Victoria-based Burkett Asset Management.

Economic data for the past few months has been mixed, said Burkett, putting investors on edge as they worried the Fed had waited too long to start cutting.

“At least for the moment, we’re winning with interest rate cuts and no clear-cut cooling in the economy,” he said.

In New York, the Dow Jones industrial average was up 38.17 points at 42,063.36. The S&P 500 index was down 11.09 points at 5,702.55, while the Nasdaq composite was down 65.66 points at 17,948.32.

The S&P/TSX composite index closed up 1.28 points at 23,867.55.

On Wednesday the Fed also projected two more cuts totalling a half-percentage point in 2024, followed by a full percentage point in 2025.

“We’re not saying, ‘mission accomplished’ ... but I have to say, though, we’re encouraged by the progress that we have made,” said Fed chair Jerome Powell on Wednesday.

The cut, as well as the comments from Powell and the projections, help set the Bank of Canada to keep cutting steadily as well, noted Burkett, having already cut three times this year.

When the Bank of Canada beat the Fed to the punch, there were some concerns that diverging rate policies between the two banks could put inflationary pressure on Canada as the U.S. dollar gained strength.

“If we hadn't seen a cut (from the Fed), it would have looked a little riskier,” he said.

“There would have been a growing schism between the policies that would eventually play out in our currency markets and potentially then spur on inflation here in Canada.”

Now that the rate-cut milestone is out of the way, investors will continue to be focused on “granular” data points, said Burkett, but no longer to try and figure out whether the Fed is set to cut.

Instead, they will be more so looking for clues as to how the Fed’s cuts — and their pace — are affecting the economy, he said.

“I think markets now have clarity on what the interest rate outlook might be,” he said.

“The reason we're looking at economic data now is to play less of the guessing game on the monetary policy action side, but rather to assess (the) impact of monetary policy that has now become more clear.”

The Canadian dollar traded for 73.72 cents US compared with 73.73 cents US on Thursday.

The November crude oil contract was down 16 cents at US$71 per barrel and the November natural gas contract was up 12 cents at US$2.72 per mmBTU.

The December gold contract was up US$31.60 at US$2,646.20 an ounce and the December copper contract was down a penny at US$4.34 a pound.

— With files from The Associated Press

This report by The Canadian Press was first published Sept. 20, 2024.

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

Rosa Saba, The Canadian Press