04:27 PM EDT, 07/31/2024 (MT Newswires) -- The Toronto Stock Exchange closed at record high on Wednesday as resource issues jumped, Canada's economy rose in May and Federal Reserve Chair Jerome Powel said a September cut to U.S. interest rates could be on the table.

The S&P/TSX Composite Index closed up 286.14 points to 23,110.81, the highest ever. Base Metals, up 3.2%, and Energy, up 3.0%, led the charge higher, followed by Information Technology, up 2.9%. Battery Metals was the sole decliner, down 1.99%.

West Texas Intermediate (WTI) crude oil closed sharply higher on Wednesday, rising 4.3% from a near two-month lows as geopolitical risk heightened following the assassination of a key leader of the Hamas militant group while a report showed another drop in U.S. oil inventories. WTI crude for September delivery closed up US$3.18 to settle at US$77.91 per barrel, while September Brent crude, the global benchmark, closed up US$2.09 to US$80.72.

Gold traded higher late afternoon on Wednesday on rising geopolitical risk following the assassination of a leader of the Hamas militant group in Tehran, and a weakening dollar after the Fed meeting left interest rates unchanged as expected while Powell said a September cut could be on the table, depending on economic data. Gold for December delivery was last seen up US$42.60 to US$2,494.50 per ounce.

The TSX was also boosted by Canadian GDP data for May, which showed a 0.2% rise, while Statistics Canada said it expects second-quarter GDP growth of 2.2%.

RBC said the bottom line is that today's report reveals that Canadian GDP grew slightly faster than expected in May, and was on balance strong in the second quarter. Still, RBC noted, early indicators for June, including wholesale sales (-0.6%), manufacturing sales (-2.6%), and retail sales (-0.3%) all suggested that the momentum is waning towards the end of the quarter. "Importantly," it said, "the higher than expected quarterly print would still on balance suggest another decline in per-capita GDP in Q2."

RBC thinks the economic backdrop should give the Bank of Canada room to deliver another interest rate cut in their next meeting in September. RBC expects a total of 100 basis points of cuts to the overnight rate this year, including the 50 basis points cuts already delivered in June and July.

Derek Holt, Vice-President & Head of Capital Markets Economics at Scotiabank, warned the Bank of Canada's cuts are too dovish and markets are believing the BoC's Governor Tiff Macklem somber outlook. "Market sentiment is piling onto Macklem's dovishness in a priced-for-perfection way," he said.

Elsewhere, TD Economics said "a lot can change in seven weeks" , noting that at the last Fed meeting, committee members marked down their expectations for rate cuts this year to one cut from three. And a couple of tame inflation prints later, TD added, it sounds like Chair Powell and company are teeing up a shift to rate cuts as they focus on both the risk, "presumably downside", to maximum employment and inflation.

"While there is no update on the FOMC forecasts at today's meeting, the shift suggests the Fed is likely to cut interest rates more than once over the remainder of 2024," according to TD.

For BMO Economics the bottom line is that the Fed remains data dependent as always, but it now appears that the 'more good data' bar is not as high as it was before, particularly with labor market developments becoming more important.

Between today and the September 18 meeting, BMO noted, three are two employment reports, including this Friday, and two CPI reports to be released along with one on the PCE price index. If the interim data continue their current themes of ebbing inflation pressures and weakening labor market outcomes BMO expects to see a rate cut at the next Fed confab.

At Desjardins, Royce Mendes said the Fed Chair sounded more open to cutting rates in September than the official monetary policy statement released earlier, but Mendes added Powell's comments still didn't contain any explicit signals.