Tech helps lift TSX to biggest monthly gain in over two years

By Fergal Smith

(Reuters) - Canada's main stock index rose on Tuesday to wrap up its strongest month in over two years, as technology shares rallied following U.S. wage growth data that could encourage the Federal Reserve to ease the pace of interest rate hikes.

The Toronto Stock Exchange's S&P/TSX composite index ended up 195.27 points, or 0.95%, at 20,767.38. For January, it was up 7.1%, its biggest monthly gain since November 2020.

Wall Street shares also rose as U.S. labor costs increased at their slowest pace in a year in the fourth quarter, giving the Fed a boost in its fight against inflation ahead of the central bank's critical policy decision on Wednesday.

"Wage growth is slowing in the U.S. even though unemployment remains extremely low ... it feeds into the narrative that the Fed is going (to) slow down its pace (of tightening)," said Angelo Kourkafas, an investment strategist at Edward Jones Investments in St. Louis, Missouri.

"This is consistent with the narrative of disinflation and that stability is helping growth and tech stocks."

A slower pace of tightening could increase the value to investors of the future cash flows that technology and other high growth sectors are expected to produce.

The Toronto market's technology sector rose 1.9% and heavily-weighted financials were up 1%.

The energy sector also gained 1% as oil settled 1.25% higher at $78.87 a barrel, while the materials group, which includes precious and base metals miners and fertilizer companies, added 1.4%, helped by higher gold and copper prices.

Standout performers included Lithium Americas Corp. Its shares gained 13.5% after the miner said it would jointly invest to develop the Thacker Pass mine in Nevada along with U.S. carmaker General Motors.

(Reporting by Fergal Smith; Additional reporting by Shashwat Chauhan in Bengaluru; Editing by Vinay Dwivedi and Deepa Babington)