New year rally not done yet
The Canadian Press - Jan 23, 2023 - Business Buzz

Photo: Contributed

TORONTO — Canada’s main stock index posted a modest gain Monday, while U.S. stock markets saw bigger growth, continuing Friday’s rally amid strength in the technology sector.

The S&P/TSX composite index was up 128.37 points at 20,631.58.

In New York, the Dow Jones industrial average was up 254.07 points at 33,629.56. The S&P 500 index was up 47.20 points, gaining more than one per cent, at 4,019.81, while the Nasdaq composite was up 223.98 points, or more than 2%, at 11,364.41.

“It’s a continuation of the risk-on sentiment that we’ve really seen to start 2023,” said Macan Nia, co-chief investment strategist at Manulife Investment Management.

While the new-year rally that kicked off 2023 appeared to come to a halt last week, markets Friday and Monday seemed to indicate it’s not over just yet.

“We had a strong end of day on Friday and that has continued into today,” Nia said.

U.S. economic indicators released Monday morning were “very poor,” said Nia, bordering on recessionary, which is likely leading investors to have more hope about central banks being near the end of their interest rate hiking cycles.

“The odds of a recession have increased. And all that has done is likely put downside pressure on inflation going forward.”

Markets are in a period where they are still welcoming bad news at the margins, as they have more or less priced in a mild recession, Nia said.

“But again, we don’t want the data to be too bad, because what the markets have not priced in is a severe recession,” he said.

The Bank of Canada is widely expected to raise its key interest rate by 25 basis points Wednesday and then pause for the rest of the year, with the potential to cut later in the year, Nia said.

“The Canadian consumer is very interest-rate sensitive. And we know that those sharp interest rate increases we saw last year have yet to really flow through the broader economy,” he said.

The Canadian dollar traded for 74.73 cents US compared with 74.51 cents US on Friday.

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