1. Canadian Equities Reach Decade-High Following Dovish Fed Signals

On Wednesday, Canada’s principal stock index witnessed a robust 2% surge, achieving a ten-month closing high in a widespread market rally driven by increased risk appetite after the U.S. Federal Reserve hinted at lower borrowing costs in 2024.

As of the provisional close at 4:10 p.m., the Toronto Stock Exchange’s S&P/TSX composite index recorded an impressive gain of 395.61 points, or 1.96%, closing at 20,629.45. This marked the index’s highest closing level since February 3. The notable upswing mirrored the positive momentum on Wall Street, where the Dow Jones Industrial Average achieved its inaugural record high since January 2022.

2. Federal Reserve’s Impact on Market Dynamics

The Federal Reserve, in its latest policy decision, maintained interest rates and communicated through updated economic projections that the extensive tightening of U.S. monetary policy implemented over the last two years has concluded. The central bank indicated the likelihood of lower borrowing costs in 2024.

Barry Schwartz, Chief Investment Officer and Portfolio Manager at Baskin Wealth Management, remarked on the market’s response, stating, “The markets are cheering the Fed’s decision. The initial headline of no rate increase was well understood by the markets, but the commentary in the presser that he (Fed Chair Jerome Powell) gave got markets excited, and the commentary is that pretty much they know they need to act on interest rates well before inflation looks like it’s going to reach the 2% level.”

3. Sectoral Performance and Noteworthy Stock Movements

Following the Federal Reserve’s announcement, sectors traditionally impacted by higher interest rates, such as real estate and utilities, emerged as top performers on the TSX.

Among individual stocks, Bank of Nova Scotia experienced a 1.1% increase after the unveiling of plans by Canada’s fourth-largest lender to focus more on domestic and Mexican operations in CEO Scott Thomson’s inaugural shareholder meeting.

H&R Real Estate Investment Trust observed a significant 10% surge after announcing the sale of the Toronto waterfront property, 25 Dockside Drive, for C$232.5 million.

Vermilion Energy (NYSE:VET) gained 6.2%, buoyed by its 2024 budget, which included plans to increase dividends by 20%.

Transcontinental recorded a 3.5% gain following the packaging company’s report of a rise in fourth-quarter adjusted profit per share.