S&P/TSX composite essentially flat as sentiment muted by rising COVID infections

·3 min read

TORONTO — Canada's main stock index was essentially flat Thursday as investors took their foot off the pedal on concerns about rising COVID-19 infections and pocketed some profits following a good few weeks of trading.

"I think we're just digesting a little bit of the gains that we've seen from this solid month-to-date surge that the TSX has had," said Mike Archibald, vice-president and portfolio manager with AGF Investments Inc.

The S&P/TSX composite index closed up 19.99 points to 16,909.81 and is 8.5 per cent higher so far in November.

In New York, the Dow Jones industrial average was up 44.81 points at 29,483.23. The S&P 500 index was up 14.08 points at 3,581.87, while the Nasdaq composite was up 103.11 points at 11,904.71.

The day was marked by a re-rotation from cyclicals back to technology stocks and stay-at-home names in Canada and the U.S.

Archibald said its natural for investors to take some profits after financials and energy, in particular, skyrocketed in the past two weeks.

Markets got a small lift in afternoon trading on reports that U.S. Senate Majority Leader Mitch McConnell and House Speaker Nancy Pelosi had resumed their discussions around a COVID stimulus bill.

Archibald said the market is aware that a deal is unlikely to happen before Joe Biden becomes president on Jan. 20.

"Nonetheless, every time you get one of these headlines there's a little bit of optimism and that seems to be what's moving the S&P higher here," he said in an interview.

Coronavirus remains a concern as infections surge even before winter arrives, prompting more global lockdowns that could put a damper on broader economic growth.

"So I can understand why there's some move back into some of the more growthier plays and the work-from-home names today," Archibald said.

However, the closer we get to massive inoculations by mid-2021, the more likely that there will be a sustainable rally in sectors like industrials, financials and energy, he said.

Until then, there's probably a greater risk of an "economic malaise" that will force the market to re-price expectations because the current outlook is positive for the fourth and first quarters, said Archibald.

"I think the next couple of weeks window here, there's a risk that we get a bit of a pullback from this solid move, and then you probably get your strong seasonal move into year-end."

Meanwhile, markets saw no direction from weekly U.S. jobless claims, which rose slightly to 742,000, but continuing claims fell a bit.

Technologies led the TSX, gaining 1.2 per cent as several names were higher, including Shopify Inc. which climbed 3.6 per cent.

Materials fell the most, losing under one percentage point on falling gold prices.

The December gold contract was down US$12.40 at US$1,861.50 an ounce and the December copper contract was up 0.4 of a cent at US$3.20 a pound.

The sector dropped despite an 11.1 per cent gain by Norbord Inc. after it received a $4-billion all-stock takeover bid from West Fraser Timber Co. Ltd.

Energy was also lower as crude prices fell, hurting several Canadian oil producers. Shares of Seven Generations Energy Ltd. and Canadian Natural Resources were down 2.2 and 1.7 per cent, respectively.

The January crude contract was down 11 cents at US$41.90 per barrel and the December natural gas contract was down 12 cents at US$2.59 per mmBTU.

The Canadian dollar traded for 76.44 cents US compared with 76.55 cents US on Wednesday.

This report by The Canadian Press was first published Nov. 19, 2020.

Companies in this story: (TSX:OSB, TSX:WFT, TSX:VII, TSX:CNQ, TSX:SHOP, TSX:GSPTSE, TSX:CADUSD=X)

Ross Marowits, The Canadian Press