Stock mar­kets con­tinue hit­ting records


Canada’s largest stock mar­ket con­tin­ued its record-break­ing streak for a third straight day, as bank stocks ral­lied on both sides of the bor­der amid sig­nals from the U.S. Fed­eral Re­serve that it re­mains com­mit­ted to hik­ing in­ter­est rates.

In Toronto, the S&P/TSX com­pos­ite in­dex advanced 29.45 points to 15,786.03, with fi­nan­cials and en­ergy stocks chalk­ing up large gains. The in­dex has been on a tear re­cently, ad­vanc­ing for the sixth ses­sion in a row.

Wall Street in­dices also rose to record lev­els again, with the Dow Jones in­dus­trial av­er­age jump­ing 92.25 points to 20,504.41, the S&P 500 adding 9.33 points to 2,337.58 and the Nas­daq com­pos­ite ris­ing by 18.61 points to 5,782.57. It’s the fourth day of record closes for U.S. mar­kets.

Much of the gains in Toronto and New York were at­trib­uted to the fi­nan­cials sec­tor, as in­vestors re­acted pos­i­tively to hawk­ish com­ments from Fed chair Janet Yellen.

Bank stocks do well in a higher in­ter­est rate en­vi­ron­ment be­cause it in­creases the yields on their cash re­serves and it earns more when lend­ing money.

Ear­lier in the day, Yellen tes­ti­fied be­fore a Se­nate com­mit­tee that the U.S. cen­tral bank is ready to grad­u­ally raise rates if the job mar­ket continues to strengthen and inflation continues to rise.

She also cau­tioned that it “would be un­wise’’ if the Fed waited too long to move on rates, be­cause then it would be forced to raise them rapidly. She re­peated the word “grad­ual’’ to de­scribe ex­pec­ta­tions for fu­ture in­creases and gave no hints on whether in­vestors can an­tic­i­pate a hike at its next meet­ings in March or June.

The cen­tral bank raised rates in De­cem­ber for just the sec­ond time in a decade. Its key in­ter­est rate cur­rently is be­tween a 0.5 to 0.75 per cent range.

It was Yellen’s first tes­ti­mony be­fore Congress since U.S. Pres­i­dent Don­ald Trump took of­fice.

Stephen Car­lin, head of equities and man­ag­ing di­rec­tor at CIBC As­set Man­age­ment, says Yellen’s com­ments were pur­posely vague be­cause the cen­tral bank doesn’t want to be ob­li­gated to act ac­cord­ing to a set time­line with­out know­ing the ef­fects that can re­sult from poli­cies en­acted by the Trump ad­min­is­tra­tion.

Some econ­o­mists fore­cast that Trump’s am­bi­tious eco­nomic pro­gram will lead to higher inflation.

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