Strength in base metal and utilities stocks helped Canada's main stock index rise more than 150 points on Thursday, while U.S. stock markets also climbed higher.

Markets made a partial recovery after slumping the day before, with the TSX falling more than one per cent on Wednesday.

The S&P/TSX Composite Index closed up 164.92 points, or 0.8 per cent, at 20,765.73.

In New York, the Dow Jones Industrial Average was up 322.35 points at 37,404.35. The S&P 500 Index was up 48.40 points at 4,746.75, while the Nasdaq Composite was up 185.92 points at 14,963.87.

After weeks of strength on the market, a down day was bound to happen, said Brianne Gardner, senior wealth manager with Velocity Investment Partners at Raymond James Ltd.

“Looking from a technical perspective, it wouldn't be surprising to us to see the markets take a little bit of a cool off here,” she said. 

After a weak period heading into the fall, markets have been on a hot streak since November, said Gardner. The U.S. Federal Reserve’s rate hold last week, in which it projected three cuts in 2024, helped add to that momentum, she said. 

“I think that played a significant role in investor sentiment,” she said. 

Profit-taking and tax-loss selling can also cause extra volatility around the end of the year, noted Gardner. 

But she thinks the fourth-quarter rally isn't necessarily over. 

Heading into 2024, both Canada and the U.S. are far from where they started the year, said Gardner, as inflation has continued to moderate under the weight of higher interest rates.

Canada in particular is showing clear signs of a slowdown, she said, and may already be in a recession. 

Rate cuts could come as soon as the end of the first quarter in Canada, said Gardner, perhaps preceding cuts south of the border.

There, the economy has proved more resilient amid monetary tightening, she said — Canada’s economy is much more sensitive to interest rates. 

“I think from our viewpoint, expecting a soft landing, we foresee the Fed gradually reducing rates,” said Gardner, somewhere around three or four cuts. 

The U.S. economy’s growth this summer wasn’t quite as strong as expected, a new report Thursday said. 

In Canada, new data on retail sales showed they grew 0.7 per cent month-over-month in October, but were likely flat in November.

The Canadian dollar traded for 75.13 cents U.S. compared with 75.01 cents U.S. on Wednesday.

The February crude oil contract was down 33 cents at US$73.89 per barrel and the February natural gas contract was up 11 cents at US$2.46 per mm/BTU.

The February gold contract was up US$3.60 at US$2,051.30 an ounce and the March copper contract was up a penny at US$3.92 a pound.

With files from The Associated Press

This report by The Canadian Press was first published Dec. 21, 2023.