Canadian stocks posted strong decent gains on Wednesday

Index Update:

After four straight sessions of gains, Canadian stocks declined on Wednesday as investors weighed the reopening of the Strait of Hormuz against expectations that oil production in the Gulf may take longer to recover. Market sentiment was also pressured by profit-taking, following the nearly 3.5% advance recorded over the previous four trading sessions.

After opening a little lower than yesterday's close, today the benchmark S&P/TSX Composite Index gained early in the session but gave ground later to trade lower throughout the rest of the session before settling at 35,125.11, down by 264.47 points (or 0.75%).

Macro Update:

In the U.S., citing resurgent inflation, the U.S. Federal Reserve left the benchmark interest rates unchanged.

The Federal Open Market Committee maintained the federal funds rate at 3.50% to 3.75% in line with expectations of economists.

In its Summary of Economic Projections, nearly half of FOMC members supported an interest rate hike later this year.

On the data front, it was largely uneventful for Canada except for the new housing price numbers, released by Statistics Canada, which fell 0.30% month-on-month in May, after a 0.40% decrease in April, and below expectations of a 0.10% decline.

Uncertainty lingers over the Canada-United States-Mexico Agreement on free trade. With the July 1 deadline to extend the agreement formally for 16 years or continue under annual review not far, Canadian investors are anxious for a settlement.

Top Movers:

Among the individual stocks, Great-West Lifeco Inc (3.23%), EQB Inc (2.67%), Igm Financial Inc (1.98%), IA Financial Corporation (1.86%), and Bank of Nova Scotia (1.83%) were the prominent gainers.

Our Stance:

The momentum indicators also remain supportive, with the 14-day Relative Strength Index (RSI) near 57.78, signaling healthy buying interest while staying below overbought conditions, leaving room for additional upside. Immediate support is situated around the 35,000 level, and as long as the index remains above this zone, the broader bullish structure is expected to stay intact. A sustained move higher could encourage renewed buying activity and support further gains in the sessions ahead.

Commodity Update:

The U.S. dollar remained near a more than two-month high on Thursday as expectations of additional Federal Reserve rate hikes strengthened, adding pressure on major currencies and pushing the Japanese yen closer to levels that have previously prompted intervention concerns. In the commodities market, gold declined by 1.06% to USD 4,334.90 per ounce, while silver fell 2.48% to USD 69.01 per ounce. Copper also weakened by 1.09% to USD 13,683.00 per tonne. Meanwhile, Brent crude oil fell 1.00% to USD 78.73 per barrel as investors evaluated the impact of the newly announced U.S.-Iran peace accord alongside concerns about a potential global supply surplus.

Technical Update:

The S&P/TSX Composite Index declined 264.47 points, or 0.75%, on Wednesday to close at 35,125.11, reflecting a modest pullback after recent gains. Despite the weakness in the latest session, the broader technical outlook remains positive. The index continues to trade comfortably above its 21-day Simple Moving Average (SMA), which remains an important dynamic support level and reinforces the prevailing bullish trend. Momentum indicators also remain supportive, with the 14-day Relative Strength Index (RSI) near 57.78, signaling healthy buying interest while staying below overbought conditions, leaving room for additional upside. Immediate support is situated around the 35,000 level, and as long as the index remains above this zone, the broader bullish structure is expected to stay intact. A sustained move higher could encourage renewed buying activity and support further gains in the sessions ahead.