TSX higher with U.S. interest rate trajectory in focus

Investing.com - Futures linked to Canada’s main stock exchange inched higher on Tuesday, after intensifying bets on a U.S. interest rate cut helped support the average in the prior session.

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The S&P/TSX composite index jumped 0.97% at 296 points at 30,900.65.

Index gained by 443.70 points to end at 30,604.35 on Monday. It was the index’s highest closing level since November 12.

Along with a boost from the start of the key U.S. shopping season, the average was aided by an uptick in gold prices, which inspired a climb in the wider materials group, including metal mining shares. A gauge of the broader technology sector also advanced by 5.5%.

U.S. stock gains

U.S. stocks gains even as investors bank some of the previous session’s gains ahead of a batch of key economic data that could influence Federal Reserve policy.

The Dow Jones Industrial Average gained 666 points, or 1.42%, while the S&P 500 index gained 0.89%, and the NASDAQ Composite added 0.67%.

The main averages on Wall Street advanced on Monday, with sentiment boosted by comments from Fed policymakers which underpinned hopes for a rate cut at the central bank’s upcoming meeting in December.

The broad-based S&P 500 gained almost 1.6%, the tech-heavy NASDAQ Composite jumped 2.7%, recording its best day since May 12, and the blue chip Dow Jones Industrial Average closed 0.4% higher.

Economic data in spotlight

The recent positive tone has been helped by dovish comments from a number of Fed policymakers, prompting resurgent bets that the Fed will cut interest rates further in December.

New York Fed President John Williams said last week that the central bank still could cut rates in the near-term to support the labor market, an this view has been largely echoed by his colleagues Christopher Waller and Mary Daly.

The Wall Street Journal reported on Monday that these allies of Federal Reserve Chair Jerome Powell have laid the groundwork for him to push through an interest rate cut during the central bank’s December 9-10 meeting.

But the decision is likely to be contested in an increasingly divided rate-setting committee, especially as a lack of clear data points for October leave the Fed flying blind into its final meeting for the year.

Markets are now pricing in a 79.7% chance the Fed will cut rates by 25 basis points during its December 9-10 meeting, up sharply from a 49.8% chance seen last week, CME Fedwatch showed.

However, this puts the focus on the release of a number of long-delayed official economic readings for September this week, as they will offer more clues about the health of the world’s largest economy.

Industrial production, producer price index inflation and retail sales data is due on Tuesday, followed by PCE price index data, the Fed’s preferred inflation gauge, on Wednesday.

But, such was the length of the U.S. government shutdown, the numbers only cover the month of September — and analysts have suggested that the state of the economy may have already changed compared to just two months ago.

Dell highlights the earnings schedule

The latest quarterly reporting period is gradually coming to a close, but there are still a number of companies detailing their results, and Dell Technologies will headline these after the bell on Wall Street.

The company, whose customers including groups like CoreWeave and Elon Musk’s AI startup xAI, almost doubled its annual profit growth target for the next four years in October, underscoring its big bet on surging demand for its servers which help power AI models.

Zoom Video Communications will also be in focus after the work services company posted stronger-than-expected third-quarter earnings and upbeat full-year guidance after the close Monday, while also increasing its share buyback authorization by $1 billion.

Elsewhere, Google is sharply escalating its bid to rival Nvidia (NASDAQ:NVDA) in the AI chip race, and Meta Platforms is emerging as a potential multibillion-dollar customer, The Information reported late Monday.

Crude retreats

Oil prices fell Tuesday, weighed by the prospect of a U.S.-brokered peace deal between Russia and Ukraine, which could result in the return of Russian supply to the global market.

Brent futures dropped 0.6% to $62.34 a barrel, and U.S. West Texas Intermediate crude futures declined 0.7% to $58.53 a barrel.

Both crude benchmarks gained 1.3% during the previous session, but have been nursing steep losses in recent weeks amid growing fears of a looming supply glut and cooling global demand.

Gold wavers

Gold prices oscillated around the flatline on Tuesday, as traders assessed the trajectory for Fed rate cuts.

The prospect of lower rates bodes well for non-yielding assets such as bullion, given that it diminishes the appeal of investing in debt.

Observers were also taking note of a barrage of key U.S. economic readings. Gold has widely been trending higher even as the dollar remained firm.

Spot gold dipped 0.1% to $4,130.87 an ounce, while gold futures for February fell 0.1% to $4,165.30/oz by 06:42 ET.