S&P/TSX Composite Index Reaches Record High Driven by Energy and Base Metals Surge
Canada's main stock index, the S&P/TSX composite index, surpassed 30,000 for the first time on Tuesday, reaching a new record high. This surge was primarily driven by strong performance in the energy and base metal sectors, while U.S. stock markets presented a mixed picture in late-morning trading.
Factors Contributing to the TSX Milestone
According to Brian Madden, chief investment officer with First Avenue Investment Counsel, a "reasonably broad-based rally" pushed the TSX over the 30,000 threshold. He highlighted that gold's performance throughout the year and strength in the energy and financial sectors on Tuesday were major contributors to the index's growth.
Madden stated, "We had anticipated we'd breached this threshold; it may have come a little sooner than we thought, but the markets are gripped with momentum." He emphasized a long-term perspective, stating, "For us, as medium and long-term investors, we know we're going to pass through psychological milestones and round numbers every so often, but it's eyes forward, eyes on the prize ... and we like what we're seeing here."
Disconnect Between Stock Market and Economy
Brian Belski, chief investment strategist at BMO Capital Markets, acknowledged potential surprise at the stock market's boom amidst recession fears. He told CBC News, "the stock market is a market of stocks, the stock market is not the economy."
Belski added that he believes the TSX and other North American markets are likely to continue their strong performance for some time, pointing to the resilience and fundamental focus of Canadian companies: "Canada has a tremendous amount of amazing companies that have amazing resilience that have been focusing on fundamentals and that's why at the TSX is hitting new highs."
US Market Overview and Tech Sector Impact
In New York, the Dow Jones industrial average was up 66.27 points at 46,381.54. The S&P 500 index was up 29.39 points at 6,693.75, while the Nasdaq composite was up 157.50 points at 22,788.98.
Shares in Nvidia significantly boosted the market, soaring 3.9 per cent following the announcement of a $100 billion US investment in OpenAI, the creator of ChatGPT. This partnership aims to add at least 10 gigawatts of Nvidia AI data centres to enhance OpenAI's computing capabilities.
Ian Chong, portfolio manager at First Avenue Investment Counsel, commented on the Nvidia news: "So that is going to move the markets quite a bit. On top of that, you've got a whole bunch of ancillary stocks that are benefiting from this news." He noted that U.S. utilities are experiencing a bump due to the immense electricity demands of new data centers.
Oracle Corp. also influenced the market positively, gaining 6.3 per cent. A senior official in the U.S. President Donald Trump's administration indicated that the tech giant will receive a copy of TikTok's algorithm to operate for U.S. users, a key part of the deal to keep the platform running in the country. Additionally, Apple Inc. saw a 4.3 per cent increase in shares, driven by strong early demand for the newly released iPhone 17 and potential for growth in the Chinese market.
Gold and Canadian Stocks
The strength in the tech sector also benefitted Canadian stocks, with shares in e-commerce platform Shopify Inc. rising by 2.7 per cent. Another significant contributor to the TSX's performance was the surge in gold prices. The December gold contract increased by $69.30 US, reaching $3,775.10 US an ounce on Monday.
Barrick Mining Corp. saw a 7.4 per cent rise on Monday after announcing that a study revealed a Nevada project could produce up to 750,000 ounces of gold annually. Kinross Gold Corp. shares also increased by 3.8 per cent.
According to Chong, "While gold has done really well over the past year and a bit, the gold miners haven't done as well until more recently. So it's playing a lot of catch-up and a lot these names are really firing on all cylinders."
