North American stock markets climb; commodities weaken on Chinese market woes

In New York, the Dow Jones industrial average was up 431.63 points to set a new record high at 42,512.00. The S&P 500 index was up 40.91 points at 5,792.04, beating its all-time high set last week, while the Nasdaq composite was up 108.70 points at 18,291.62.

The gains on Wall St. and Bay St. contrasted with the situation in China, where stock markets have been tumbling the last two days over investor concerns that the Chinese government has not done enough to stimulate the country’s flagging economy.

Stocks in Shanghai Wednesday fell 6.6 per cent for their worst loss since February 2020, when fears were rising about a virus emanating from Wuhan and other cities in China. In Hong Kong, the Hang Seng index fell 1.4 per cent after dropping more than nine per cent the day before, which was its worst loss since the 2008 global financial crisis.

Worries about the health of the Chinese economy sent commodities lower Wednesday. Gold was down and oil continued to tick lower after international benchmark Brent crude briefly topped US$81 per barrel earlier in the week over concerns that escalating tensions in the Middle East could interrupt oil supplies.

But while the prospect of weaker Chinese demand had a negative impact on commodities, North American markets continue to be buoyed by news out of the U.S., where a suite of recent reports has shown the U.S. economy remains stronger than expected.

John Zechner, chair of J. Zechner Associates, described the market sentiment south of the border as “euphoric” – even in the face of threats like the Middle East conflict.

“Surprisingly, compared to what I’ve seen historically, geopolitics seems to have less of an impact on the market than it used to,” Zechner said.

“These things really seem to take a backseat to the U.S. economy.”

While a stronger-than-expected U.S. economy has forced traders to lower their expectations for how much the U.S. Federal Reserve might cut interest rates at its next meeting in November – markets are now pricing in an anticipated 25-basis-point cut, as opposed to another half-point cut.

The economic strength also increases the likelihood for strong third-quarter corporate earnings from major U.S. companies.

Zechner said if third-quarter results show a surge in earnings growth, it will increase investor confidence that the U.S. is headed for a “soft landing,” or a situation where inflation comes down without tipping the economy into recession.

“We know the big tech companies are probably going to be fine for now, as long as they continue with the big AI infrastructure build,” he said.

“What we want to see is the rest of the economy and what’s going on there. You know, rail companies, the financials, the industrials, the big consumer companies, the auto companies — that’ll be the big test.”

Here in Canada, the energy and mining sectors closed slightly in the green, in spite of weaker commodity prices. Timber stocks gained as Hurricane Milton approached landfall in Florida, leading to speculation that lumber will be in demand during the post-storm rebuilding period. Interfor Corp. gained 5.07 per cent in the day’s trading, while West Fraser Timber Co. Ltd. closed up 4.65 per cent.

The Canadian dollar traded for 73.05 cents US compared with 73.22 cents US on Tuesday.

The October crude oil contract was down 33 cents at US$73.24 per barrel and the November natural gas contract was down eight cents at US$2.66 per mmBTU.

The December gold contract was down US$9.40 at US$2,626.00 an ounce and the December copper contract was down four cents at US$4.40 a pound.

Zechner said he will be watching closely for the release of the next U.S. inflation report scheduled for Thursday. But in the meantime, he added, the U.S. economy has all the momentum.

“It seems to be in this sweet spot where everything is going right,” he said.

This report by The Canadian Press was first published Oct. 9, 2024.

– With files from The Associated Press

Companies in this story: (TSX:GSPTSE, TSX:CADUSD)