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A record day for the S&P 500, as bond yields take a breather

The day in one line: The S&P 500 closed at a record on Tuesday as long-term bond yields eased off 24-year highs and a nuclear power deal lit up utility stocks. Futures are slightly lower this morning, yields are back up, and the Fed's meeting notes come out this afternoon.

What moved and why

1. The S&P 500 hits a new high. The S&P 500 rose 44.98 points, or 0.58%, to 7,818.93, a record close. The Nasdaq gained 122.48 points, or 0.45%, to 27,599.79, also a record. The Dow rose 253.38 points, or 0.49%, to 51,521.28. Small companies lagged: the Russell 2000 fell 16.17 points, or 0.57%, to 2,830.97. This morning, S&P 500 futures are down about 0.1%, Dow futures about 0.2% and Nasdaq futures about 0.2%.

2. Bond yields pause, then climb again. The US 10-year Treasury yield slipped to about 5.28% on Tuesday, down from its highest close in about 24 years on Monday. That gave stocks room to rise. The relief was short: this morning the 10-year is back near 5.31% and the 30-year near 5.68%. One thing to keep in mind: the market's gains are narrow. Yahoo Finance notes the S&P 500's three largest companies make up roughly a fifth of the whole index.

3. Google signs a 20-year nuclear power deal. Google agreed to buy 890 megawatts of power from Constellation Energy for 20 years. The deal pays for upgrades at reactors Constellation already runs in Illinois, Pennsylvania and New Jersey, so no new plant is needed. Constellation jumped about 12% to roughly US$300. Other power producers rose in sympathy: Vistra about 8% and Talen Energy about 7%. The message: tech giants will pay up for steady, round-the-clock power for their AI data centres.

4. The US trade gap widens to a 17-month high. The US trade deficit (imports minus exports) grew 13.7% in August to US$105.6 billion, the widest since March 2025 and above the US$102 billion forecast. Imports hit a record US$420.8 billion, driven by computer chips and industrial machines. Despite tariffs, Americans are still buying a lot from abroad. Year to date, though, the deficit is about 20% smaller than in the same period of 2025.

5. Takeover talk and chip news drive big single-stock moves. Option Care Health, a home-infusion company, jumped about 33% on reports of buyout interest. Marvell Technology rose about 7% after raising its long-term revenue targets at its investor day. Data-storage makers fell: Seagate dropped about 8% and Western Digital about 7%, on worries about new production capacity at rival Toshiba.

6. Oil steady, gold up, then both turn. US crude (WTI) settled at US$89.44 a barrel on Tuesday, up just one cent. This morning it is up about 0.8% to about US$90.12, and Brent, the global benchmark, is back near US$100. The reasons: Houthi attacks on Saudi airports and the risk of hurricane disruption in the Gulf of Mexico. Gold rose US$30.30 to US$4,187.10 an ounce on Tuesday but is down about 0.9% this morning to about US$4,148. US natural gas is up about 2.7% this morning to US$3.20 per million BTU, helped by lower US production and rising exports.

Canada corner

TSX climbs on a utility mega-deal. The S&P/TSX Composite rose 130.96 points, or 0.37%, to 35,649.51. Utilities, telecoms and clean tech led. Energy lagged.

Emera and Canadian Utilities to merge. Halifax-based Emera agreed to buy Canadian Utilities in an all-stock deal worth about C$14.3 billion. The combined company would be worth about C$72 billion including debt, serve about six million customers through 12 regulated utilities, and plan to spend C$32 billion on its networks through 2030. Canadian Utilities' parent, Atco, will become a separate industrial services company. The premium for Canadian Utilities holders is small, about 0.7%. Atco was the big winner, up about 9% to C$81.02 at the close. The deal is expected to close in the second half of 2027.

Other movers. Athabasca Oil kept climbing, up about 13.5%, a day after agreeing to be bought by Cenovus. Cenovus fell about 3%. West Fraser Timber fell 4.25% to C$89.94.

Trade surplus jumps (to be confirmed). Canada posted a merchandise trade surplus of C$4.2 billion in August, the largest since May 2022 and far above forecasts, according to early reports. Exports rose 2.5% and imports fell 2%. Exports to the US rose about 8.1%. US data back this up: the US trade deficit with Canada widened by US$4.1 billion to US$7.1 billion in August.

Business mood cools. The Ivey PMI, a survey of Canadian purchasing managers, fell to 58.2 in September from 64.3 in August, below the 65.2 forecast. A reading above 50 still means activity is growing. The prices index rose to 82.8, a sign that cost pressures are building.

The loonie. The Canadian dollar closed at 70.29 US cents, up from 70.16 on Monday. This morning it trades around C$1.423 per US dollar, slightly weaker. The loonie has lost about 3% against the US dollar over the past month.

Rates. Canada's 10-year yield eased to about 3.93%, still more than 1.3 percentage points below the US 10-year. The Bank of Canada's key rate is 2.25%. The Fed's range is 3.75% to 4.00% after a hike in September. That gap pulls money toward US dollars. The Bank of Canada's next decision is October 28.

Coming up: Canada's September jobs report on Friday (forecast: about 9,500 new jobs).

One thing to understand: the trade deficit

A trade deficit means a country buys more from other countries than it sells to them. In August, the US imported US$420.8 billion of goods and services and exported US$315.2 billion. The difference, US$105.6 billion, is the deficit.

A deficit is not automatically bad. It often means a country's consumers and businesses are spending strongly. Right now, US companies are importing huge amounts of chips and machinery to build data centres. But a large deficit means the country must borrow from abroad or sell assets to foreigners to pay for it. That can matter more when bond yields are already high.

For Canada, the picture is the reverse this month. Canada sold more than it bought, and much of that went to the US. A trade surplus adds to Canada's economic growth.

On the calendar

Today (Wednesday, October 7)

Rest of the week

Sources

This newsletter is general information, not investment advice.

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