Four-day rally pushes S&P/TSX composite to record high, U.S. stock markets also climb

·3 min read

TORONTO — Investor optimism fuelled a four-day run to start the month that culminated Thursday in Canada's main stock index setting a record high.

The S&P/TSX composite index closed up 126.06 points to 18,041.97, one-tenth of a point below the all-time close. It set an intraday record of 18,072.17 and has gained 4.1 per cent so far in February.

U.S. stock markets also shined, with the tech-heavy Nasdaq composite and S&P 500 reaching new closing and intraday highs.

In New York, the Dow Jones industrial average was up 332.26 points at 31,055.86. The S&P 500 index was up 41.57 points at 3,871.74, while the Nasdaq was up 167.20 points at 13,377.74.

Investors were reacting to signs of an impending U.S. stimulus package and supportive economic data, said Anish Chopra, managing director with Portfolio Management Corp.

"Between stimulus to help the U.S. get through the COVID period and jobless claims falling below what's expected, just that whole package of positive economic news is certainly helping the markets," he said in an interview.

First-time claims for unemployment insurance dipped to 779,000 last week, beating expectations.

And Congress is expected to pass a large stimulus package despite disagreement between Republicans and Democrats over its size.

"You even have (Treasury Secretary) Janet Yellen saying it's OK to go big. I think investors were expecting a Biden stimulus package to be big so it's certainly meeting their expectations," Chopra said.

In addition to strong economic data, fourth-quarter earnings have been strong.

The consequence was a broad rally on the TSX with nine of 11 major sectors climbing.

"It's very broad-based as investors just get more optimism about a return to normal after the COVID period," said Chopra

Saputo Inc. pushed consumer staples higher while shares of Canada Goose Holdings Inc. surged 22.4 per cent after it posted strong quarterly results.

Energy was helped by crude oil prices, which rose once again on an improved outlook for demand and tighter supply caused by lower U.S. inventories and OPEC plus Russia maintaining their cut in output.

The March crude oil contract was up 54 cents at US$56.23 per barrel and the March natural gas contract was up 14.6 cents at nearly US$2.94 per mmBTU.

Seven Generations Energy Ltd. gained 5.8 per cent while MEG Energy Corp. rose 4.8 per cent.

The Canadian dollar traded for 77.95 cents US compared with 78.23 cents US on Wednesday.

The heavyweight financials sector increased by 0.8 per cent as higher bond yields pushed Bank of Montreal shares up 1.8 per cent, Brookfield Asset Management Inc. up 1.4 per cent and Manulife Financial Corp. up 1.2 per cent.

Health care and materials lagged.

The metals and minor sector fell as the price of gold slipped below the psychological level of US$1,800 an ounce.

Investors have used gold as a hedge against inflation, but it doesn't do as well in an environment of rising interest rates.

The April gold contract was down US$43.90 at US$1,791.20 an ounce and the March copper contract was down 1.25 cents at US$3.55 a pound.

Shares of New Gold Inc. lost 7.5 per cent while OceanaGold Corp. were down 4.3 per cent.

While February tends to be a weaker trading month, Chopra is looking to see if the trend of positive economic data continues.

"Obviously there'll be some bumps in the road, but do we get generally a positive trend whether it's in GDP growth, unemployment, oil demand growth ... and recovery in more traditional sectors like tourism and hospitality."

This report by The Canadian Press was first published Feb. 4, 2021.


Ross Marowits, The Canadian Press