S&P/TSX composite resumes climb to end week propelled by COVID-19 vaccine news

·4 min read

TORONTO — Canada's main stock index resumed its upward climb to end a strong week that was shaped by heightened hopes for a COVID-19 vaccine. 

The S&P/TSX composite index closed up 93.46 points to 16,675.64, rising 2.4 per cent for the week. 

North American stock markets were propelled higher early in the week after Pfizer announced Monday that its coronavirus vaccine was 90 per cent effective in trials.

Hopes that it would help a global economic recovery stalled Thursday with rising virus cases and hospitalizations that increased the likelihood of new lockdowns.

Investors used that pullback to take advantage of buying opportunities, said Kevin Headland, senior investment strategist at Manulife Investment Management.

"I think today is back to picking up companies that perhaps fell unjustly yesterday," he said in an interview.

Headland added that market gyrations from headline news seem to have a shorter shelf life as investors shrugged off Thursday's losses by looking ahead to a vaccine announcement next week from Moderna.

Investors are also focusing a bit more on fundamentals with third-quarter earnings coming in better than expected, he said.

And there's clarity about the results of the U.S. presidential election despite legal efforts by President Donald Trump to overturn his loss to Joe Biden.

"So I think the market is really looking where it should be, which is the fundamentals and earnings growth and that we are on a path to recovery, despite perhaps short-term headwinds I would say from increased COVID cases."

In New York, the Dow Jones industrial average was up 399.64 points at 29,479.81 to end the week 4.1 per cent higher. The S&P 500 index was up 48.14 points at 3,585.15, while the Nasdaq composite was up 119.70 points at 11,829.29, down marginally on the week despite large early-week losses.

The stock market rally over the past week reflects past experience during an election year, said Headland.

"In the past, September and October were two of the weakest months for the year during election years and November, December two of the strongest. So it seems that the markets are playing in exactly the way they've played in previous election years."

Headland said the market is looking favourably at data like jobless claims, employment, retail sales and durable goods orders that reinforce the strength of the recovery.

Eight of the 11 major sectors of the TSX were higher on Friday, led by health care, energy and consumer discretionary.

Energy rose 1.6 per cent despite lower crude oil prices with Husky Energy Inc. and Cenovus Energy Inc. up 4.6 and 4.3 per cent, respectively.

Crude fell 2.4 per cent to end a strong week in which prices climbed more than eight per cent. The decrease was the result of increased rig counts in the U.S. as supply picked up a little early in anticipation of increased demand from a more normalized economic environment, said Headland.

The December crude contract was down 99 cents US at US$40.13 per barrel and the December natural gas contract was up 1.9 cents US at US$3.00 per mmBTU. 

The Canadian dollar traded for 76.06 cents US compared with 76.20 cents US on Thursday. 

The heavyweight financials sector was higher on a steeper bond yield curve and anticipation that an economic recovery might preclude banks from taking large loan losses despite high provisions, said Headland.

A 4.5 per cent gain by Air Canada shares pushed up the industrials sector.

Materials was also higher as the December gold contract was up US$12.90 at US$1,886.20 an ounce and the December copper contract was up 3.3 cents US at nearly US$3.18 a pound.

Gold was down 3.3 per cent on the week and is 15 to 17 per cent undervalued, said Headland.

Consumer staple, telecommunications and utilities trailed on the day.

This report by The Canadian Press was first published Nov. 13, 2020. 

Companies in this story: (TSX:AC, TSX:HSE, TSX:CVE, TSX:GSPTSE, TSX:CADUSD=X) 

Ross Marowits, The Canadian Press