04:21 PM EDT, 08/14/2024 (MT Newswires) -- The Toronto Stock Exchange closed higher for a fourth-straight session Thursday as it looks ready to retest its July 31 record high as lower than expected U.S. inflation looks likely to convince the Federal Reserve to begin cutting interest rates, offering a stimulus to the economy of Canada's largest trading partner and giving the Bank of Canada room to keep cutting its own rates.

The S&P/TSX Composite Index closed up 141.83 points to finish at 22,760.01. Health Care and Information Technology led the gains, with the indices rising 1.8% and 1.5% respectively. Base Metals and Telecoms were the only decliners, down 0.5% and 0.3%.

Gold prices retreated from a day-prior record high by mid-afternoon on Wednesday as Treasury yields moved up after U.S. inflation rose less than expected last month, firming expectations the Federal Reserve will begin lowering interest rates next month. Gold for December delivery was last seen down US$23.40 to US$2,484.40, falling off from Tuesday's record closing of US$2,507.80 per ounce.

West Texas Intermediate (WTI) crude oil closed lower on Wednesday, giving up early gains as a report showed a rise in U.S. oil inventories last week, even as U.S. inflation eased last month and Middle East tensions continue to run hot. WTI oil for September delivery closed $1.37 to US$76.98 per barrel, while October Brent crude, the global benchmark, closed down US$0.93 to US$79.76.

The TSX has boosted by a recent general improvement in sentiment for commodities and a seeming easing in fears around a U.S. recession as inflation wanes. The U.S. Bureau of Labor Statistics on Wednesday reported the July Consumer Price Index (CPI) fell to a 2.9% annualized pace from 3.0% in June and the consensus estimate for a 3.0% rise, according to Marketwatch. Core CPI, which excludes volatile food and energy, ran at a 3.2% pace last month, matching the consensus estimate and down from 3.3% in June.

The data follows on Tuesday's release of the July Producer Price Index (PPI) which also showed a lower than expected rise, firming market hopes the Federal Reserve will begin to cut interest rates at the September meeting of its policy committee.

With the slowing pace of price increases rate cuts from the Federal Reserve can come in September, November and December, according to David Dole, head of economics at Macquarie, following today's data.

"Encouragingly," he said, "the three-month trend continued to subside, reaching the lowest level since Feb. 21. Major components were mixed, but overall supportive of continued disinflation."

Together with input data from the U.S. PPI earlier this week, Macquarie estimates a reading of +0.14% MoM in the core PCE for the month. Doyle said the data overall for July are supportive of a sustained disinflation trend.

"The extent and magnitude of easing will hinge on the data flow, with inflation and employment readings taking on particular importance," Doyle said.

Reflecting the renewed enthusiasm around the U.S. economy and equities, Wells Fargo Investment Institute today said it is increasing both its 2024 and 2025 S&P 500 Index target range and earnings per share (EPS) target. Also for 2024 and 2025, it is raising its Russell Midcap Index target range and reducing its U.S. Small Cap (Russell 2000 Index) EPS targets due to index reconstitutions.