North American stock markets partially rebound from biggest losses in three months

·4 min read

TORONTO — North American stock markets had their best day in nearly three months to partially recover from steep losses on Wednesday.

"It's been a roller-coaster, kind of mirror image," said Angelo Kourkafas, investment strategist at Edward Jones.

"But we don't think these wild swings that we've seen, especially in certain segments of the market, are really related to the fundamentals or investors shouldn't read too much into these moves."

He said moves by retail investors from certain trading platforms that targeted short-sellers were responsible for massive gains in shares of BlackBerry Ltd. and U.S.-based GameStop, the owner of EB Games.

But that reversed on Thursday, causing these company stocks to fall, with BlackBerry plunging 40 per cent.

Kourkafas called it a very narrow slice of the market that investors shouldn't use to extrapolate for the market as a whole.

"It's a reminder that fundamentals always prevail at the end," he said in an interview, adding that the economy is still poised to accelerate later this year as vaccines offer the possibility of a gradual return to normal.

Kourkafas said it's normal to see ups and down and that some caution is warranted after the strong recovery in equities since the March lows.

"We've seen this uninterrupted 60-plus per cent rally in stocks, so I think it would be healthy for the market to go through a period of consolidation so that the improving economy and earnings fundamentals can catch up with prices."

The S&P/TSX composite index closed up 232.77 points or 1.3 per cent to 17,657.20. It lost 354.98 points on Wednesday to wipe out all the gains in 2021.

In New York, the Dow Jones industrial average was up 300.19 points at 30,603.36. The S&P 500 index was up 36.61 points at 3,787.38, while the Nasdaq composite was up 66.56 points at 13,337.16.

U.S. markets were also helped by a reduction in jobless claims last week. Some 847,000 people filed for unemployment benefits for the first time, down from 914,000 a week earlier.

However, U.S. GDP numbers came in a little weaker than expected, increasing four per cent on an annualized basis in the fourth quarter as consumers grew more cautious about spending amid ongoing COVID-19 infections and deaths.

A broad-based rally on the TSX saw eight of 11 sectors increase, led by health care, materials, industrials, consumer discretionary and financials.

Materials gained 3.4 per cent due to a rotation into cyclical sectors and an unusual gain by silver, whose futures rose 4.9 per cent to US$26.63.

Kourkafas pointed to some reports that a lot of the action in the options market came from retail traders that wreaked havoc elsewhere.

First Majestic Silver Corp. shares climbed 21.6 per cent, while Fortuna Silver Mines Inc. was up 13.9 per cent and Pan American Silver Corp. rose 11.3 per cent.

Silver gains outpaced other metals. The April gold contract was up US$7.70 at US$1,841.20 an ounce and the March copper contract was up 2.05 cents at US$3.58 a pound.

Magna International Inc. helped consumer discretionary while Air Canada shares increased 5.5 per cent, in keeping with movements south of the border that saw American Airlines soar 17 per cent despite reporting a US$2.2-billion loss in the fourth quarter and US$8.9 billion for the year.

Financials increased 1.2 per cent following a steepening of the yield curve with the 10-year U.S. Treasury rising to 1.05 per cent.

The cyclical rotation helped the energy sector gain 0.69 per cent despite lower crude oil prices. Husky Energy Inc. was up 5.1 per cent.

The March crude oil contract was down 51 cents at US$52.34 per barrel and the March natural gas contract was down 3.8 cents at US$2.66 per mmBTU.

BlackBerry's big share loss pushed technology lower, while telecommunications fell with Rogers Communications Inc. dropping five per cent after reporting weaker quarterly results.

The Canadian dollar traded for 78.06 cents US compared with 78.28 cents US on Wednesday.

This report by The Canadian Press was first published Jan. 28, 2021.

Companies in this story: (TSX:FR, TSX:FVI, TSX:PAAS, TSX:AC, TSX:RCI.B, TSX:BB, TSX:HSE, TSX:MG, TSX:GSPTSE, TSX:CADUSD=X)

Ross Marowits, The Canadian Press