TORONTO — Canada’s main stock index closed higher on broad gains as commodities rose, while U.S. stock markets also ended up a day before the release of key inflation data.

The S&P/TSX composite index ended up 126.19 points at 20,025.05.

In New York, the Dow Jones industrial average was up 268.91 points at 33,973.01. The S&P 500 index was up 50.36 points at 3,969.61, while the Nasdaq composite was up 189.04 points at 10,931.67.

The rise in stocks shows markets are anticipating encouraging news when the U.S. releases December inflation data Wednesday that will allow central banks to ease up on rate increases, said Kevin Headland, co-chief investment strategist at Manulife Investment Management.

“It seems once again that the market is perhaps anticipating that the weaker inflation data might signal that the central banks are more likely getting closer to their terminal rates, or maybe already there.”

He said, however, that he expects no change in tone from the U.S. Federal Reserve no matter the data as chairman Jerome Powell has emphasized the need get rates to a level that will create sustained downward pressure on inflation.

“The market keeps trying to fight the Fed, and keeps trying to expect a change in tone by the Federal Reserve, and the Federal Reserve says no, we’re still on process.”

Any tone of easing from the Fed risks putting upward pressure on the economy and inflation, so it will likely err on the side of caution and wait longer than expected, said Headland.

The consensus is that U.S. inflation will come in at 6.5 per cent, down from 7.1 per cent last year, while the latest Canadian inflation numbers come out Jan. 17.

Canadian job data released last week, which showed the economy added 104,000 positions in December, is already expected by many to lead to another rate increase from the Bank of Canada.

The Canadian dollar traded for 74.49 cents US compared with 74.51 cents US on Tuesday.