North American stock markets ended the week in positive territory as the Federal Reserve chairman’s suggestion about measured interest rate hikes gave investors comfort and pushed the S&P 500 and the Nasdaq composite to touch all-time highs.
Federal Reserve Chairman Jerome Powell’s “dovish remarks” at an annual conference of central bankers provided a little more comfort for investors with its positive outlook for the U.S. economy, said Patrick Blais, senior portfolio manager at Manulife Asset Management.
“There’s more certainty on the progression of rate rises, which let’s face it investors hate uncertainty,” he said in an interview.
“We tend to overreact whenever there’s uncertainty. We become very fraught and very jittery and by providing that certainty I think it provides confidence to the market on how to view rate direction going forward.”
Bank of Canada governor Stephen Poloz is expected to reaffirm Saturday at the annual conference of central bankers in Jackson Hole, Wyoming, more gradual interest rate increases in Canada that will keep the loonie low to drive exports, Blais added.
The Canadian dollar traded higher at US76.71¢ compared with an average of US76.55¢ on Thursday.
In New York, the Dow Jones industrial average was up 133.37 points at 25,790.35. The S&P 500 index was up 17.71 points at 2,874.69 after hitting a high of 2,876.16. Nasdaq was up 67.52 points at 7,945.97 after reaching 7,949.71 in earlier trading.
The S&P/TSX composite index was up 29.26 points at 16,356.05, ending a number of good weeks.
“The backdrop is fairly constructive. There are risks out there but there’s a lot of prospects. I think investors are just forgetting or maybe overly worrying on just the negative news,” he said.
The cannabis heavy health-care sector again led the session, led by Aphria Inc. soaring nearly 23% and Canopy Growth Corp. closing up 8%.
Their performances came as reports suggested British alcohol giant Diageo was hunting for potential investments or collaborations in Canada on cannabis-infused beverages. A tie-up would follow similar moves by Constellation Brands which increased its stake in Canopy Growth Corp. and Molson Coors, which is forming a joint venture with Hydropothecary Corp.
“It’s definitely acquisition interest really driving these names in the last week,” Blais said, nothing that cannabis company stock prices aren’t based on pure earnings fundamentals.
Gold, base metals and materials also performed well on the day, with the sectors gaining 2.76, 2.68 and 1.85% respectively.
Information technology, energy, consumer discretionary and utilities were also up while financials, real estate, telecom services, industrials and consumer staples were down.
Blais said some investors had been fearful that China would overdo their clampdown on financing, but the government has adopted a more balanced view.
Unsuccessful negotiations between China and the U.S. to break a trade deadlock weren’t an overhang for markets.
“I think the market’s keeping an optimistic view that it’s in nobody’s interest to impose large tariffs or to have trade negotiations falter,” he added.
The October crude contract was up US89¢ at US$68.72 per barrel and the September natural gas contract was down US4.7¢ at US$2.92 per mmBTU.
The December gold contract was up US$19.30 at US$1,213.30 an ounce and the September copper contract was up US4.65¢ at US$2.70 a pound.