Tech stocks fuel a rally that investors didn't see coming
North American stock markets closed higher on Thursday, with major US benchmarks reaching record levels and Canada’s main index advancing, as investors responded to fresh interest rate cuts that eased borrowing costs and boosted sentiment.
US markets surge to records
The S&P 500 rose 0.48 % to 6,631.96, while the Nasdaq Composite gained 0.94 % to 22,470.73, CNBC reported. The Dow Jones Industrial Average advanced 124 points, or 0.27 %, finishing at 46,142.42. The Russell 2000 index of small-cap stocks led the rally, jumping 2.4 % to a record close of 2,464.70, marking its strongest level since 2021.
The moves came one day after the US Federal Reserve cut its benchmark rate by a quarter of a percentage point. The central bank projected two additional cuts this year, signalling greater concern about slowing economic growth than inflation.
Hedge fund manager David Tepper of Appaloosa Management told CNBC that while valuations are elevated, investors are reluctant to fight the Fed’s easing path. “I don’t love the multiples, but how do I not own it?” he said, while warning that further cuts could push markets into “danger territory.”
Technology stocks powered much of Thursday’s momentum. CNBC reported that Intel surged 22.8% – its best performance in nearly four decades – after Nvidia announced a US$5-billion investment in the chipmaker to co-develop data centre and PC products. Nvidia shares climbed 3.5% on the news.
Canadian index strengthens
The S&P/TSX composite index gained more than 130 points, supported by strength in the technology sector. The Canadian Press reported that BMO Global Asset Management chief investment officer Sadiq Adatia said the market reflected “very strong bullish sentiment” tied to lower borrowing costs and robust earnings. “If you reduce rates, then that makes it a little bit more acceptable,” he said.
Both the Bank of Canada and the US Federal Reserve trimmed rates this week by a quarter point. The dual moves underscored concerns about labour market conditions in the US while offering relief to rate-sensitive sectors such as technology and small-cap equities.
Wells Fargo’s Investment Institute lifted its year-end forecast for the S&P 500 to a range of 6,600 to 6,800, up from 6,300 to 6,500, pointing to stronger earnings and economic fundamentals.
The Canadian dollar traded at 72.48 cents US, down from 72.67 cents US on Wednesday.
