North American markets end July strong after busy earnings week, Fed decision

North American markets ended the last trading day of July on a positive note, with the main Canadian stock index gaining more than 200 points and US markets all in the green.

The S&P/TSX Composite Index closed up 236.21 points at 19,692.92 on strength in the energy, industrials and base metals sectors.

A slightly better than expected GDP report in Canada, a nice rise in oil prices and rather positive energy earnings helped push the index higher.

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North American markets end the trading day in positive territory

The latest GDP reading showed that the Canadian economy remained stable in May, with economic growth slowing as businesses faced continued supply constraints and rising interest rates.

Meanwhile, companies like Imperial Oil Ltd. released strong quarterly results on Friday morning.

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In New York, the Dow Jones Industrial Average closed up 315.50 points at 32,845.13. The S&P 500 index gained 57.86 points to 4,130.29, while the Nasdaq composite rose 228.09 points to 12,390.69.

“We are seeing an improvement in risk sentiment,” Edward Jones investment strategist Angelo Kourkafas said in an interview.

Earnings from some big tech companies in the U.S. also helped lift markets this week, although they were far from exceptional.

“Results were better than expected given the slower growth we saw in the quarter,” Kourkafas said.

The market movements at the end of the month are a good surprise for investors after a difficult first half.

The S&P/TSX Composite Index is up 4.41% month-to-date, while the S&P 500 Index is up more than 9% month-to-date.

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“Easing inflation expectations, falling bond yields, and then the potential for an earlier rate pivot by central banks are the drivers,” Kourkafas said.

The US Federal Reserve raised interest rates on Wednesday, but adopted a less hawkish tone, signaling to markets that the central bank is nearing the end of this rate hike cycle.

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But Kourkafas and his team don’t think investors are off the hook just yet, saying the volatility is here to stay.

“The fact that equities are rebounding while we are still receiving bad economic news is encouraging. At the same time, we don’t expect economic data or earnings data to pick up and improve much over the next few quarters. So we might be in a limited market,” he said.

“And while earnings results weren’t great, equities were able to absorb the more cautious outlook, so we saw equities rise…especially since the bar was quite low at the start of the trimester.”

But if companies continue to provide a cautious outlook, markets could turn around, he added.

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The Canadian dollar was trading at 77.98 cents US versus 77.91 cents US on Thursday.

The September crude contract rose US$2.20 to US$98.62 a barrel, hitting US$101.88 a barrel earlier in the day.

The September natural gas contract rose 9.5 cents to US$8.23.

The December gold contract rose US$12.60 to US$1,781.80 an ounce and the September copper contract rose almost ten cents to US$3.57 a pound.

© 2022 The Canadian Press

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