The Toronto Stock Exchange Broadcast Centre is shown in Toronto on June 28, 2013. THE CANADIAN PRESS/Aaron Vincent Elkaim

TORONTO - Canada's main stock index set new record highs Thursday on a broad-based rally led by materials and financials.

The gains were fuelled in part from Wednesday's interest rate cuts by the U.S. Federal Reserve, says Kash Pashootan, CEO and chief investment officer at First Avenue Investment Counsel Inc.

"We are in the last leg of optimism and rally before the lower interest rate environment enthusiasm wears off," he said in an interview.

The S&P/TSX composite index closed up 58.06 points at 16,858.35, after going as high as 16,913.49 earlier in the trading session.

Despite the Fed's uncertain language, investors still expect further rate cuts this year, said Pashootan.

"The market still believes that rates are going lower and so that's a positive in helping markets go higher," he said.

"We feel that given that the U.S. economy will have to absorb a recession at some point in the next 12 to 18 months, we feel that (Fed chairman Jerome) Powell has softened expectations of future cuts and so when he does introduce them later it will be a pleasant surprise and a main driver to accelerating out of the recession."

Pashootan said market expectations are high about a retaliation for an attack on Saudi Arabian oil facilities that will prompt a further rise in oil prices.

Crude oil prices surged 15 per cent following last weekend's attack. They fell as Saudi Arabia said it brought some of the output back online but remain up about six per cent.

The November crude contract gained 15 cents at US$58.19 per barrel Thursday while the October natural gas contract was down 9.9 cents at US$2.54 per mmBTU.

Eight of the 11 major sectors of the TSX rose, led by materials. The sector was pushed higher — despite lower gold prices — by a 10.3 per cent rise in shares of First Quantum Minerals Ltd. along with Barrick Gold Corp.

The December gold contract was down US$9.60 at US$1,506.20 an ounce and the December copper contract was down 0.45 of a cent at US$2.61 a pound.

Financials was helped by the Canadian Imperial Bank of Commerce whose shares climbed 1.2 per cent.

Health care fell 3.2 per cent with shares of Canopy Growth Corp. losing 8.7 per cent.

Despite higher oil prices, the energy sector was down with shares of Encana Corp. off 2.7 per cent.

In New York, the Dow Jones industrial average was down 52.29 points at 27,094.79. The S&P 500 index was flat at 3,006.79, while the Nasdaq composite was up 5.49 points at 8,182.88.

The Canadian dollar traded for an average of 75.42 cents US compared with an average of 75.35 cents US on Wednesday.

The loonie rose because it is effectively a petrocurrency, affected by changes in oil prices, Pashootan added.

"The fact that you're seeing the Canadian dollar higher today we believe is further speculation that oil prices will continue to rise off of the retaliation and the overall geopolitical landscape and growing risks of supply disruptions with oil."

This report by The Canadian Press was first published Sept. 19, 2019.

Companies in this story: (TSX:CM, TSX:WEED, TSX:FM, TSX:ABX, TSX:GSPTSE, TSX:CADUSD=X)

Note to readers: This is a corrected story. An earlier version had an incorrect closing price for the S&P/TSX composite index.

News from © The Canadian Press, 2019