As investors gear up for the holiday season, the Canadian and U.S. stock markets saw a surge in the shortened Christmas Eve trading session. Let’s take a closer look at the key highlights from the trading day:
- The S&P/TSX composite index closed 97.84 points higher at 24,846.82, with most sectors experiencing gains except for telecoms and healthcare.
- In New York, the Dow Jones industrial average rose by 390.08 points to reach 43,297.03. The S&P 500 index also saw an increase of 65.97 points, closing at 6,040.04, while the Nasdaq composite surged by 266.24 points to 20,031.13.
Despite the recent market drop following the U.S. Federal Reserve’s latest outlook, the uptrend leading into the holidays seemed to be more aligned with year-end balancing than any significant change in investor sentiment.
Dustin Reid, Chief Fixed Income Strategist at Mackenzie Investments, highlighted that this trajectory was likely influenced by year-end flows and reallocation strategies rather than a fundamental shift in market sentiment following the Fed meeting.
Reid explained, “Price action around month end, quarter end, and year-end may not always have a direct link to fundamental causes, as underlying flows and realignment of portfolios can play a significant role in driving market movements.”
The U.S. Fed’s guidance of only two rate cuts in 2025, announced at the December 18 meeting, initially dampened market sentiments. However, Reid believed that the strong U.S. economy and overall market performance indicated that investors were largely anticipating and adjusting to this guidance.
Additionally, amidst concerns of the Canadian economy showing signs of softness, the market may be anticipating more rate cuts from the Bank of Canada than previously expected. Statistics Canada’s early estimate for November indicated a slight decline in real GDP, prompting discussions around potential further easing measures by the central bank in 2025.
Looking ahead, market participants are closely monitoring for any additional economic data releases that could influence trading trends. As of Tuesday, the Canadian dollar traded at 69.51 cents US, showing a marginal increase from the previous day.
Moreover, commodity prices also experienced positive movements, with the February crude oil contract rising by 86 cents to reach US$70.10 per barrel. Gold and copper contracts also saw an uptrend, closing at US$2,635.50 per ounce and US$4.11 per pound, respectively.
In conclusion, as we navigate the end of the year and look towards 2025, it is essential for investors to stay informed and adapt to changing market dynamics. The recent surge in stock markets, driven by year-end factors and reallocation strategies, serves as a reminder of the importance of staying vigilant and agile in an ever-evolving financial landscape.
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