S&P/TSX composite ends another record week on rally led by cannabis, commodities

·4 min read

TORONTO — Canada's main stock index ended a record week by moving to within 100 points of a new milestone on a broad-based rally led by health care and commodities.

The S&P/TSX composite index set another record close by gaining 77.77 points to 19,852.18 after peaking at 19,904.79, just short of the 20,000-point threshold.

"It will be quite interesting if it can breach that psychological barrier in the near term," said Kevin Headland, senior investment strategist at Manulife Investment Management.

The Toronto market outpaced its U.S. peers on the day, week and over the past month. The TSX climbed 1.7 per cent over the holiday-shortened week and 3.9 per cent in May with one day of trading remaining.

In New York, the Dow Jones industrial average was up 64.81 points at 34,529.45 to close its month with U.S. markets closed Monday for the Memorial Day holiday. The S&P 500 index was up 3.23 points at 4,204.11, while the Nasdaq composite was up 12.46 points at 13,748.74.

U.S. trading volumes were fairly light ahead of the long weekend after strong action on Thursday. The Dow and S&P are in a positive environment over recent weeks.

Ten of the 11 major sectors on the TSX were higher with health care up 2.5 per cent followed by commodities, while utilities was the sole laggard.

Cannabis producers got a lift after Hexo Corp. announced the $925-million acquisition of Redecan, prompting its shares to surge 9.5 per cent. Shares of Cronos Group Inc. increased 14.8 per cent while Organigram Holdings Inc. was up 9.7 per cent, Aurora Cannabis Inc. 6.6 per cent and Canopy Growth Inc. 6.1 per cent.

"When you see some cannabis players moving higher, it seems that a majority of companies move higher as well," Headland said in an interview.

Both materials and energy increased despite commodity prices moving in opposite directions.

Gold rose to its highest level since January while crude oil slipped on the day but remained 4.3 per cent higher for the week and for the month of May.

The August gold contract was up US$6.80 at US$1,905.30 an ounce and the July copper contract was up 1.45 cents at nearly US$4.68 a pound.

Barrick Gold Corp. shares gained 3.1 per cent.

The July crude contract was down 53 cents at US$66.32 per barrel and the July natural gas contract was up 2.8 cents at US$2.99 per mmBTU.

MEG Energy Corp. was up 3.9 per cent, followed by WCP Resources Inc. at 2.9 per cent.

Headland said oil took a bit of a breather on the day, but the fundamentals are strong heading into the traditionally busy summer driving season.

"I'd expect oil to trend higher over the near term, just on the supply-demand expected imbalance that's going to come forward, especially as we get that increasing reopening in the U.S. economy."

Technology was strong for much of the day but slipped near market close as BlackBerry Ltd. gained 1.9 per cent and Shopify Inc. was up 0.6 per cent.

The Canadian dollar traded for 82.74 cents US compared with 82.83 cents US on Thursday. However, Headland expects the loonie will be pushing to around the 85-cent mark.

In addition to being helped by crude oil prices, the currency has a strong correlation to the difference in two-year bond yields between the U.S. and Canada, added Headland.

"As the market's pricing in that the Bank of Canada will raise their rates before the Federal Reserve, which puts a positive move on that two-year differential and that's again a positive push to Canadian dollar.

"So both oil and two-year yield differential are pushing the Canadian dollar higher and it should move higher from here."

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

Companies in this story: (TSX:ABX, TSX:BB, TSX:SHOP, TSX:HEXO, TSX:CRON, TSX:OGI, TSX:ACB, TSX:WEED, TSX:MEG, TSX:WCP, TSX:GSPTSE, TSX:CADUSD=X)

Ross Marowits, The Canadian Press