04:26 PM EDT, 07/03/2024 (MT Newswires) -- Investors appear to have come back feeling refreshed after the Canada Day holiday on Monday since they pushed Canada's largest stock market up near 350 points over two days, including the 269.67 points gained Wednesday that took the Toronto Stock Exchange's S&P/TSX Composite Index to 22,223.67, the highest since June 6.

Wednesday's gains on the resources heavy index largely came on elevated commodity prices and also on optimism there will be at least one rate cut in the United States before the end of the year, with more to come in Canada.

All sectors were higher, led by Base Metals, up 3.6%.

Reflecting that, gold traded higher mid-afternoon as the dollar and treasury yields fell after a report showed a smaller than expected rise in U.S. private-sector employment last month and a larger than expected increase in initial jobless claims. Gold for August delivery was last seen up $30.40 to US$2,363.80 per ounce.

Also, West Texas Intermediate closed with a gain after a report showed U.S. oil inventories last week fell by the most in a year, while Hurricane Beryl remained well south of U.S. oil platforms in the Gulf of Mexico. WTI crude oil for August delivery closed up $1.07 to settle at US$83.88 per barrel, while September Brent crude, the global benchmark, closed up $1.10 to US$87.34.

Among individual stocks, there was a focus on Open Text ( OTEX ) , which early in the day announced a business optimization plan that will reduce headcount by near 1,200 positions, 1.7% of its global workforce, across the company. National Bank called it a "defensive move" in keeping an outperform rating and US$50 target. OTEX closed up $0.61 or near 1.5% at $42.50 on the TSX.

National Bank said: "We believe the action reflects an effort to enhance cash flow, as the current leverage ratio likely limits the potential to pursue any meaningful level of acquisitions for what remains primarily an acquisition growth name. In addition, the investment into expanding sales, service and engineering is likely to support a push to driving (some) organic growth in the interim until the company can pursue a more active level of acquisition activity. Overall, we believe the above actions signal challenging operating results in the short term, including the upcoming FQ4 results."

Longer term, National added, the actions should strengthen OpenText's margin profile post-AMC divestiture. For now, the bank is maintaining its Outperform rating primarily on valuation -- its US$50 DCF-based price target implies a 10.7x EV/EBITDA multiple on its FY25E estimates.

On the economics front, TD Economics noted today's US FOMC Minutes Meeting continued to reinforce the Fed's data dependent approach to easing their policy stance. TD said: "Despite progress on inflation stalling over the first quarter, recent inflation prints have been encouraging. But, they are unlikely to give the Fed the confidence it needs to begin lowering its policy rate. This was echoed by Chair Powell this week acknowledging the progress made on inflation, but stressing the need to see continual good data prints before easing policy."

TD added: "With economic growth slowing from the torrid pace set in 2023, the risks facing the Fed as they decide when to ease their policy stance have become more two-sided. Prematurely easing could risk delaying inflation returning to target, while maintaining rates at their current level for too long could result in a deterioration in the economic backdrop. We believe that the economy will continue coming into better balance, in line with the Fed's expectations, setting the stage for the Fed to begin lowering interest rates in the fourth quarter."

For BMO Economics the bottom line is the Fed continues to follow a very data dependent policy path. "And if the data continue to cooperate (emphasizing slow economic growth and ebbing inflation pressure), a September start to rate cuts is still well within the cards," it said.

Earlier Wednesday, Canada's merchandise trade deficit widened to $1.9 billion in May from $1.3 billion in April, as exports declined further than imports.

Desjardins said while today's trade data undershot expectations, the weakness is mostly concentrated in metal exports during a period of high volatility. Nonetheless, it added, May's print points to downside risk to the Bank of Canada's Q2 real GDP tracking of 1.5% (annualized). Looking ahead, Desjardins noted the BoC will be focused on the June labor market report this Friday and inflation data in mid-July in determining whether the next rate cut occurs later this month or gets pushed out to September.