Today’s Market Analysis

Market Analysis – September 21st

The North American market delivered a strong rebound today, although the performance was notably different across the major indexes. The Nasdaq was the clear leader, rising approximately 2.3% and moving into record territory, while the S&P 500 gained about 1.5%, the Dow Jones rose roughly 0.7%, and the TSX remained comparatively subdued. The divergence is important because it shows that today’s rally was driven primarily by growth and technology stocks rather than being an equally strong move across every major sector.

Nasdaq Composite

The Nasdaq had the strongest technical setup today. The index gained approximately 2.3% and closed around 27,122, moving above its previous record closing high of 27,093.90. The breakout was supported by strong semiconductor and technology performance, with major chip stocks leading the advance. The Nasdaq therefore enters a price-discovery phase in which previous resistance levels become potential support.

Technically, the important area to monitor is now approximately 27,000–27,100. If the Nasdaq remains above this region during the next several sessions, today’s breakout would receive stronger confirmation. A move toward 27,200 and eventually 27,500 would represent continuation of the current momentum. However, after a gain of more than 2% in one session, a modest pullback or sideways consolidation would be normal. A decline back below 27,000 would weaken the immediate breakout, while a deeper move toward the 20-day moving average would represent a more meaningful technical test.

Fundamentally, the Nasdaq continues to benefit from strong AI investment, semiconductor demand, cloud computing, data-center spending and expectations for continued technology earnings growth. The primary risks remain elevated valuations, Federal Reserve policy, Treasury yields and the possibility that earnings expectations surrounding artificial intelligence become too aggressive.

S&P 500

The S&P 500 also produced a strong technical improvement today, rising approximately 1.5% and moving close to its record levels. Reuters’ technical analysis before today’s advance identified 7,677.02 as an important resistance level, followed by the 7,756–7,772 region. A move above the August intraday record around 7,816.70 would place the index firmly into new-high territory, with 8,000 becoming an important psychological level.

The S&P 500’s technical structure is therefore improving substantially. Last week, the index had fallen below its 50-day moving average and approached its 100-day moving average following the Federal Reserve’s rate increase. It subsequently recovered above the 50-day average, and today’s rally further strengthened that recovery. As long as the index remains above its important moving-average support levels, the medium-term structure remains constructive.

The S&P 500 also provides a broader representation of today’s rally than the Nasdaq because it contains significant exposure to financials, industrials, healthcare, consumer companies and energy in addition to technology. Today’s gain therefore indicates that the improvement in sentiment was not limited exclusively to technology.

The key levels to watch are approximately 7,677 on the upside, followed by 7,756–7,772, and then the previous record area around 7,800–7,817. On the downside, approximately 7,617 represents an important support area, followed by approximately 7,520 and 7,508.

Dow Jones Industrial Average

The Dow Jones produced a more moderate advance of approximately 0.7% today. Its relative underperformance compared with the Nasdaq is significant because the Dow has much less direct exposure to the high-growth technology and semiconductor companies that drove today’s rally.

The Dow’s behavior therefore suggests that today’s market strength is still heavily tilted toward growth and technology rather than representing a uniform rotation into every area of the market. Nevertheless, the Dow’s positive performance confirms that the rally was not confined entirely to technology stocks.

Fundamentally, the Dow is more sensitive to industrial activity, financial conditions, consumer demand, healthcare and large established corporations. Consequently, it can behave differently from the Nasdaq when interest rates and economic-growth expectations change. With the Federal Reserve having recently raised rates, the Dow’s performance will continue to depend heavily on whether higher borrowing costs begin to slow economic activity.

The Dow’s more moderate advance can therefore be interpreted as evidence of a risk-on environment with a strong preference for growth stocks, rather than an across-the-board surge in every segment of the market.

TSX Composite

The Canadian market presented a noticeably different picture. The S&P/TSX Composite was approximately flat during the morning and was around 35,815–35,829, while U.S. markets were rising sharply, with six of the TSX’s ten major sectors were in negative territory early in the session.

The primary reason for the TSX’s relative weakness was the decline in crude oil prices. Oil fell more than 3% toward the US$100 level, putting pressure on Canada’s large energy sector. Energy stocks are heavily represented in the Canadian index, so a sharp decline in crude can offset gains elsewhere in the market.

The TSX nevertheless received support from financials and technology, as financials gained approximately 0.9% while information technology increased about 1.1%, helping offset weakness in energy and mining.

The TSX also remains sensitive to gold and mining prices. Precious-metals stocks weakened alongside lower gold prices today, which limited the contribution from Canada’s large materials sector. This is particularly important because gold and mining companies have been major contributors to the TSX’s broader performance this year so far.

Interest Rates and the Federal Reserve

Interest rates remain the most important macroeconomic factor across all four indexes. The Federal Reserve just raised its policy rate to approximately 3.75%–4.00%, and policymakers have indicated that another increase could occur before the end of 2026. This creates a significant tension for equity markets because higher rates can pressure valuations, particularly among high-growth technology companies.

Today’s market received some relief because the 10-year U.S. Treasury yield declined to approximately 4.97% from 5.01%. Lower Treasury yields reduce some of the immediate valuation pressure on growth stocks and helped support today’s technology-led rally.

As a consequence he market will therefore continue to react strongly to Treasury yields. If yields continue falling while corporate earnings remain strong, the environment could remain supportive for stocks. If yields return sharply above 5%, particularly alongside stronger inflation, technology and growth valuations could come under renewed pressure.

Oil and Commodities

Oil was one of the biggest differentiators between the U.S. and Canadian markets today. Brent crude fell approximately 3.4% to around US$100.29, while the November U.S. crude contract was around US$91.85 during the Canadian session. The decline followed hopes for diplomatic progress involving Iran and expectations for improved oil supply conditions.

Lower oil prices are generally supportive for inflation-sensitive equity markets because they can reduce input costs and inflationary pressure. However, they are less favorable for Canada’s energy-heavy TSX because energy companies represent a significant portion of the index.

This creates an interesting divergence. Lower oil can be positive for the Nasdaq and S&P 500 through lower inflation expectations, while simultaneously creating a headwind for the TSX through weaker energy-sector earnings expectations.

Fundamental Outlook

Fundamentally, the U.S. market continues to receive support from corporate earnings, AI investment, semiconductor demand and expectations for continued productivity growth. The decline in oil prices and Treasury yields also provided additional support today. However, the Federal Reserve’s renewed tightening cycle remains the largest macroeconomic counterweight.

The Canadian market has a different set of drivers. Financials remain important sources of support, while energy and materials are highly sensitive to oil and precious-metals prices. The Bank of Canada’s policy outlook is therefore particularly important, especially as investors assess Canadian economic growth and inflation.