North American stock market volatility continues with strong start to trading week

·4 min read

TORONTO — Volatility continued to grip North American stock markets with gains to begin the week after days of large movements that culminated in the biggest weekly loss in three months last week.

The S&P/TSX composite index closed up 355.43 points or about two per cent to 17,692.45 after losing 320.18 points on Friday.

That marked the largest daily gain in nine months.

"We're seeing the resiliency of the market," said Craig Fehr, investment strategist at Edward Jones.

He expects bouts of volatility will continue but be of short duration because of the fundamental soundness of the economic recovery.

Last week's big movements in stocks such as GameStop and BlackBerry Ltd. shifted Monday to silver as that commodity's prices reached an eight-year high.

"I think we are seeing a bit of the shock and awe settle out today or to start this week, relative to what we saw last week," Fehr said in an interview.

The bigger conclusion for investors, he said, is that the fundamental backdrop didn't change and will continue for the rest of the year.

In addition to some market turmoil caused by the battle between some retail investors and short-sellers, Fehr said last week's moves could also be attributed to some routine profit-taking.

The TSX rose 55 per cent in the preceding 10 months while the S&P 500 was up 66 per cent.

"As an investor you have to expect bouts of indigestion to perk up periodically," he said.

That could mean more downside to come, but it should be temporary because there aren't dramatic, prolonged or severe sell-offs when the fundamental backdrop is positive.

"The pendulum in the markets is going to swing back to the health and the pace of the economic recovery. That to me is going to be the most powerful guide in 2021 and I think that needle still remains pointed firmly in a positive direction."

In New York, the Dow Jones industrial average was up 229.29 points at 30,211.91. The S&P 500 index was up 59.62 points at 3,773.86, while the Nasdaq composite was up 332.70 points at 13,403.40.

Technology led the broad-based rally on the TSX with all 11 major sectors rising. Lightspeed POS Inc. increased 9.7 per cent while Shopify Inc. climbed 5.6 per cent and BlackBerry was up 4.7 per cent.

Cyclical sectors also performed well, with energy, materials and industrials shining.

Energy gained 3.9 per cent as crude oil prices rose on a positive outlook for demand as U.S. politicians are moving closer to a fiscal stimulus, even one that may be smaller than the US$1.9 trillion package proposed by President Joe Biden.

"We might see it sliced up into multiple tranches, but I think the take-away for the markets is that additional fiscal stimulus is on the way," said Fehr.

The March crude contract was up US$1.35 at US$53.55 per barrel and the March natural gas contract was up 28.6 cents at US$2.85 per mmBTU.

Shares of Crescent Point Energy Corp. rose 10.2 per cent, while Tourmaline Oil Corp. was up 8.7 per cent and MEG Energy Corp. increased 7.3 per cent.

Despite higher oil prices, the Canadian dollar traded for 77.98 cents US compared with 78.25 cents US on Friday.

Silver sent materials higher with shares of Silvercorp Metals Inc., First Majestic Silver Corp. and Fortuna Silver Mines Inc. soaring 25.7, 23.5 and 18.5 per cent, respectively.

The April gold contract was up US$13.60 at US$1,863.90 an ounce and the March copper contract was down one cent at nearly US$3.55 a pound.

Industrials gained nearly two per cent, with trucking firm TFI International Inc. up 6.4 per cent.

This report by The Canadian Press was first published Feb. 1, 2021.


Ross Marowits, The Canadian Press