S&P/TSX composite up as dollar, energy, materials and health-care sectors rise

·4 min read

TORONTO — Worries about a new COVID-19 strain in the U.K. that affected stock trading earlier this week seemed to evaporate on Wednesday as most North American markets rose in a tide of pre-Christmas optimism.

"Sentiment is up, the market looks pretty good, it's a positive day, we've only got another half day before Christmas," said Allan Small, senior investment adviser at HollisWealth, referring to the shortened market hours on Christmas Eve.

"We're ending on a good note and hopefully we can have a bit of a Santa Claus rally in between Christmas and New Year's."

Canada's main market indicator, the S&P/TSX composite index, closed up 41.11 points at 17,593.57 as the dollar gained ground against its American counterpart and higher prices for oil drove energy sectors higher.

In New York, the Dow Jones industrial average was up 114.32 points at 30,129.83. The S&P 500 index was up 2.75 points at 3,690.01, while the Nasdaq composite was down 36.80 points at 12,771.11.

The Canadian dollar traded for 77.78 cents US compared with 77.47 cents US on Tuesday, rising after three straight days of declines.

"It's more U.S. dollar weakness than Canadian dollar strength," said Small, describing the American greenback as a "security blanket" that sells off with good news.

"Whenever there's fear in the world, that's the fear trade, but when the fear subsides, either for a day or for a week or whatever period, you'll find money leaving the U.S. dollar and therefore other currencies moving higher against the U.S. dollar."

Statistics Canada reported Wednesday that real gross domestic product grew 0.4 per cent in October, marking the sixth consecutive month of growth and slightly beating the average economist estimate of a 0.3 per cent gain.

The agency also released a preliminary estimate for November, which showed a 0.4 per cent expansion.

Meanwhile, in the United States, the government released reports that gave a mixed picture of the economy, including one that said fewer U.S. workers filed for unemployment benefits last week.

Another said that orders for long-lasting goods strengthened by more than expected last month, a good sign for the nation’s manufacturers. But a third report noted consumers pulled back on their spending by more last month than economists expected. It was the first drop since April.

But the upbeat mood in the stock markets has more to do with growing optimism that the pandemic will be defeated eventually, Small said, allowing people and industries to get back to work.

"All in all, I think we're moving in the right direction," he said.

"I think the markets and investors really sense that it's not a matter of 'if' anymore, it's just a matter of 'when.'"

The energy sector led the way on the Toronto Stock Exchange with a 4.36 per cent gain as the February crude oil contract jumped US$1.10 to US$48.12 per barrel.

Oilsands producer MEG Energy Corp. was up 9.4 per cent at $4.65, Crescent Point Energy Corp. rose almost nine per cent to $3.05 and Enerplus Corp. was ahead 7.45 per cent at $4.04.

Marijuana stocks helped the health-care sector to a two per cent jump, with Canopy Growth Corp., Aurora Cannabis Inc. and Aphria Inc. all up by almost four per cent.

The biggest loser among sectors was information technology, brought down by the same software companies that contributed to its gains earlier this week.

Shopify Inc. fell 6.5 per cent to $1,542.46 and Constellation Software Inc. was off 4.88 per cent to $1,687.22.

"When the vaccines are rolling out, when everybody's feeling confident that people are going to get back out there living life again, you tend to find a lot of these 'stay-at-home-trade' sell-offs, like a Shopify," said Small.

The February gold contract was up US$7.80 at US$1,878.10 an ounce and the March copper contract was up four cents at US$3.56 a pound.

The January natural gas contract closed down 17 cents at US$2.61 per mmBTU.

— By Dan Healing in Calgary.

This report by The Canadian Press was first published Dec. 23, 2020.

Companies in this story: (TSX:GSPTSE, TSX:CADUSD=X, TSX:MEG, TSX:ERF, TSX:CPG, TSX:WEED, TSX:ACB, TSX:APHA, TSX:SHOP, TSX:CSU)

The Canadian Press