TSX hits record high as Fed signals possible rate cut

By Fergal Smith

(Reuters) -Canada's main stock index climbed to a record high on Wednesday, helped by gains for resource, technology and high dividend pay stocks, as the Federal Reserve signaled it could begin cutting interest rates in the coming months.

The S&P/TSX composite index ended up 286.14 points, or 1.3%, at 23,110.81, eclipsing the all-time closing high it set on July 16. For the month, the index was up 5.65%, its biggest monthly advance since November.

The Fed held interest rates steady but opened the door to reducing borrowing costs at its next meeting in September as inflation continues coming into line with the U.S. central bank's 2% target.

"With rates potentially moving lower, we do have more of a dividend play in the TSX," said Stan Wong, a portfolio manager at Scotia Wealth Management. "Those dividend players will be a bit more attractive in a falling, or lower interest rate environment."

High dividend paying stocks dominate the utilities and financial sectors, which combined account for roughly one-third of the TSX's market capitalization. Financials rose 0.7% and utilities ended 0.8% higher.

Energy was up 3% as the price of oil settled 4.3% higher on rising Mideast tension, while the materials group added 2% as gold and copper prices climbed.

Technology was another standout, climbing 2.9%.

"There is a double edged sword with technology given the higher valuations but also the higher growth prospects of artificial intelligence, cybersecurity and the cloud," Wong said.

Preliminary data showed Canadian economic growth accelerating to 2.2% in the second quarter, while corporate results were also upbeat, helping to boost the shares of New Gold Inc and Precision Drilling Corp.

They were up 13.1% and 6.8% respectively.

(Reporting by Fergal Smith in Toronto and Shubham Batra; Editing by Shreya Biswas and Sandra Maler)