Key points
- TSX futures show a slight gain, suggesting a potential pause in the recent rally.
- S&P/TSX composite index hit a new all-time high on Thursday. US consumer prices increased slightly more than expected in August.
- Weekly jobless claims rose to a near four-year high, signaling a cooling labor market.
- Fed rate cut of at least 25 basis points is almost certain next week.
The S&P/TSX 60 index futures contract experienced a slight gain on Friday morning, falling by 13.96 or 0.81% to reach 1,738.62, hinting at a possible temporary slowdown after a robust rally for Canada’s main stock index. This comes on the heels of the S&P/TSX composite index reaching an all-time high of 29,407.89 on Thursday, a 0.8% increase from the previous session.
Positive market sentiment was fueled by economic data indicating a strengthening US economy, despite some concerns.
US consumer price growth accelerated slightly more than anticipated in August, climbing 0.4% and pushing the annual rate to 2.9%, the fastest pace in seven months. However, this figure still aligned with economists’ forecasts.
Simultaneously, initial jobless claims in the US surged to a near four-year high of 263,000, providing further evidence of a cooling labor market. These economic indicators have solidified expectations for a Federal Reserve interest rate cut at their upcoming meeting.
Market sentiment strongly anticipates a 25-basis-point reduction in borrowing costs at the Federal Reserve’s September 16-17 meeting, with only a minor chance of a more significant 50-basis-point cut, according to the CME’s FedWatch Tool.
Analysts attribute this expectation to the Federal Reserve prioritizing a softening labor market over persistent inflationary pressures. This expectation is further reinforced by commentary from ING analysts, who highlight the weakening jobs market as the Fed’s primary concern.
Beyond the interest rate expectations and economic indicators, other market activities included Adobe Systems raising its annual financial forecasts, driven by strong demand for its AI-enhanced software. The oil market rebounded after Thursday’s losses, with Brent and WTI crude futures experiencing gains.
Gold prices also rose, edging closer to record highs, driven by the anticipation of a Fed rate cut. Several IPOs, including the Winklevoss twins’ Gemini crypto exchange, are also slated to begin trading on Friday.
