04:23 PM EDT, 08/21/2024 (MT Newswires) -- The Toronto Stock Exchange rose to a fresh record high on Wednesday, a day ahead of a disruptive shutdown of Canada's two major railways and the start of fiscal third-quarter earning from the key banking sector.

The S&P/TSX Composite Index closed up 84.29 points to 23,121.73, surpassing the previous record of 23,116.78 set two days earlier. Base Metals was the biggest gainer, up 1.6%, followed by Information Technology up 1.1%. The biggest decliner on the day is Battery Metals, down 0.7%.

Canada stock pickers await the start of the fiscal third-quarter earnings season for the nation's big banks, starting Thursday with Toronto-Dominion Bank ( MLWIQXX ) (TD.TO, TD). The focus will be on TD's U.S. results and strategy after it bungled a US$13.4 billion takeover of First Horizon and faces a money-laundering probe into its U.S. branches. Bloomberg noted the lender faces the threat of billions of dollars in fines and, maybe worse, the prospect that Regulators will impose limits on future U.S. growth.

Also in focus, operations at CN Rail (CNR.TO, CNI) and Canadian Pacific Kansas City ( CP ) (CP.TO, CP) are due to halt as of 12:01 a.m. Eastern time on Thursday unless a last minute deal is reached between the railways and the union that represents more than 9,000 workers.

"It's unfortunate timing to add on a Canadian CN/CP (shutdown) because of a confluence of emerging potential supply chain shocks that could be highly disruptive", Bank of Nova Scotia noted. "The timing couldn't be worse as farmers are entering harvest season and retailers are ordering fall/winter lines and for the holiday shopping season."

Desjardins in its Monthly Macro Update for August 2024 noted financial markets have stabilized after volatility in the first few trading days of the month. The volatility, it noted was triggered by fears of a sharp slowdown in U.S. economic activity following a weaker than expected employment report.

"While the market overreacted to incoming data, pricing had not fully reflected the possibility of a recession in the U.S. throughout most of the summer," Desjardins said, before adding: "Market pricing is now more reasonable relative to our baseline scenario. The heightened volatility has seen fixed income post strong returns, although year-to-date, equities continue to outperform most other asset classes."

Desjardins noted a 1.5% one month return and 9.9% year to date return for the TSX.

According to Desjardins, the need to lower interest rates in this country is rising and it will take time for lower rates to flow through to households. It said the mortgage renewal cycle remains a headwind to economic activity, and even with lower policy rates, mortgage payments are expected to increase significantly. As a result, Desjardins has pulled forward its forecast for rate cuts from the Bank of Canada and now expects a 25bp cut at every meeting until the middle of next year.

BMO Economics, after looking at the latest FOMC Minutes on Wednesday, said the bottom line is that a U.S. rate cut on September 18 was teed up at the end of July. In a press conference, Chair Jerome Powell said, "a rate cut could be on the table at the September meeting" if subsequently released inflation data were "good" (BMO noted "they were") and labor market data weakened further (BMO noted "they did"). Market attention now turns to Powell's Friday speech at Jackson Hole, Wyoming, for further corroboration, BMO added.

For its part, National Bank of Canada after looking at today's revised U.S. Nonfarm payrolls data said it will only reinforce the Fed's conviction that the labor market is cooling, and make it more likely to cut policy rates significantly over the coming months.

TD Economics said the "risks remain two-sided" as Fed Governor Bowman noted in her speech yesterday that inflation is still "uncomfortably" above the Fed's 2% goal. TD said the pace of cuts beyond the September meeting of the central bank's policy committee will depend on inflation continuing to move sustainably towards 2%. But TD expects that given the further softening in labor market conditions since this meeting, the committee will have the confidence to lower its policy rate by 25 basis points in September and again in November and December.

West Texas Intermediate (WTI) crude oil fell to the lowest in more than seven months despite a report showing U.S. inventories fell last week, as the focus remains on on weak China demand and easing international tensions. WTI crude for October delivery closed down US$1.24 to settle at US$71.93 per barrel, the lowest since Jan.8, while October Brent crude, the global benchmark, closed down US$1.15 to US$76.05.

Gold prices edged down from a record high late afternoon on Wednesday even treasury yields eased ahead of a key speech from Federal Reserve Chair Jerome Powell on Friday that could firm expectations the central bank is ready to begin lowering interest rates. Gold for December delivery was last seen down US$0.30 to $2,550.30 per ounce, a day after closing at the highest ever.