North American bounce back following additional intervention from U.S. Fed

North American bounce back following additional intervention from U.S. Fed

TORONTO — North American stock markets bounced back Monday from early pandemic-induced anxieties following a further intervention from the Federal Reserve.

The U.S. central bank announced it would begin purchasing corporate bonds as part of its plan to ensure companies can borrow through the bond market during the COVID-19 pandemic.

Markets rallied around yet another example of the Fed’s commitment to ensure there’s ample stability and liquidity in the financial system to support the economic recovery, said Craig Fehr, investment strategist, Edward Jones.

“It’s also part of their approach, which is to leave no doubt in the financial markets’ minds that they are committed to doing whatever it takes to support the economy and the financial markets,” he said in an interview.

While Monday’s move wasn’t widely expected, Fehr said it’s not surprising given the unprecedented steps it has already taken.

The S&P/TSX composite index closed up 103.09 points at 15,359.66 after dipping to a low of 14,934.71.

In New York, the Dow Jones industrial average gained 157.62 points at 25,763.16. The S&P 500 index was up 25.28 points at 3,066.59, while the Nasdaq composite rose 137.21 points at 9,726.02.

Stock markets staged strong comebacks after being initially worried about a second wave of infections due to rising infections in some U.S. states and in China.

The economic recovery in Canada and the United States will be sustainable but “a little more lumpy” than what markets priced in when they rallied more than 40 per cent off their March lows, said Fehr.

“Last week was really a re-emergence of that volatility as the realization that it wasn’t going to be as smooth as perhaps hoped,” he said.

The Fed helped reignite some optimism, said Fehr.

“The Fed does not have a cure for this pandemic. They have implemented a lot of strategies as a way to provide a cure to the financial markets to get to the other side of this pandemic.”

Shopify Inc. was the strongest performer on the day, gaining 8.3 per cent after the Ottawa-based e-commerce giant announced a partnership with Walmart that allows U.S. merchants to sell their products on the retailer’s website.

That helped the technology sector to gain 1.8 per cent, trailing only materials and utilities.

Materials moved higher even though gold prices dropped, along with other safe-haven assets like the U.S. dollar.

The August gold contract was down US$10.10 at US$1,727.20 an ounce and the July copper contract was down 3.3 cents at nearly US$2.57 a pound.

The Canadian dollar traded for 73.51 cents US compared with 73.55 cents US on Friday.

“When we look at sector performance today, it’s reflecting the increased optimism. So we’re seeing the cyclical sectors that have gained momentum here in the second half of the day,” said Fehr.

Despite higher crude oil prices, the energy sector fell as shares of Shawcor Ltd. plunged 11.1 per cent.

The July crude contract was up 86 cents at US$37.12 per barrel and the July natural gas contract was down 6.2 cents at nearly US$1.67 per mmBTU.

The heavyweight financials sector dipped with Laurentian Bank shares losing 1.5 per cent following the surprise retirement of its chief executive.

Industrials was also lower with shares of Bombardier Inc. losing 11.5 per cent after news it will be removed from the TSX Composite Index after this week. Air Canada shares decreased 4.4 per cent.

Despite Monday’s gains, Fehr said market volatility will re-emerge as investors continue to worry about what a second wave of infections mean for the economy.

“I don’t think it’s a foregone conclusion that we have to go back and re-test those lows of March … but it’s going to be a choppier ride higher in my opinion from here than we’ve seen over the past couple months.”

This report by The Canadian Press was first published June 15, 2020.

Companies in this story: (TSX:SHOP, TSX:AC, TSX:BBD.B, TSX:LB, TSX:SCL, TSX:GSPTSE, TSX:CADUSD=X)

Ross Marowits, The Canadian Press

Business

Get local stories you won't find anywhere else right to your inbox.
Sign up here

Just Posted

(Photo Courtesy of Red Deer Catholic Regional Schools)
Red Deer Catholic Regional Schools will not pilot draft curriculum

RDCRS is one of many divisions in the area to opt out of the pilot of the K-6 draft curriculum

Pay parking station on 50A Street in Sylvan Lake. (File Photo)
Resident Parking program returns to Sylvan Lake this weekend

The programs runs from May 15 to Sept. 15 every year

Supporters gather during a rally against measures taken by government and health authorities to curb the spread of COVID-19 at the Whistle Stop cafe in Mirror Alta, on Saturday May 8, 2021. The Whistle Stop was shut down by AHS for not complying with COVID-19 rules. THE CANADIAN PRESS/Jason Franson
Police hand out tickets to dozens leaving anti-lockdown protest in Alberta

Hundreds gathered outside the Whistle Stop Café in the hamlet of Mirror, Alta.

Alberta’s environment department has known for years that toxins from old coal mines are contaminating populations of the province’s official animal, the bighorn sheep. THE CANADIAN PRESS/Craig Bihrl
Alberta government knew bighorn sheep contaminated with coal mine selenium, scientist says

Jeff Kneteman says Alberta Environment has known about the problem in bighorn sheep for years

Prime Minister Justin Trudeau receives his COVID-19 AstraZeneca vaccination in Ottawa, Friday, April 23, 2021. THE CANADIAN PRESS/Adrian Wyld
75% of Canadians need 1st vaccine dose to have more normal summer: Trudeau

The country is on track to hit a major milestone on the road to COVID-19 herd immunity Tuesday, with 40% vaccinated with a 1st dose

A vial of the AstraZeneca COVID-19 vaccine.THE CANADIAN PRESS/Carlos Osorio
Alberta to stop giving first doses of AstraZeneca COVID-19 shot as supply dwindles

There aren’t any confirmed shipments of AstraZeneca coming, and the province only has 8,400 doses of it left

Winnipeg Jets’ Andrew Copp (9) and Edmonton Oilers goaltender Mike Smith (41) watch an incoming shot during second period NHL action in Winnipeg, Monday, April 26, 2021. THE CANADIAN PRESS/Fred Greenslade
‘Very jealous’: Canadian teams can’t take advantage of NHL’s relaxed COVID-19 rules

League eased some tight COVID-19 health and safety protocols over the weekend for fully vaccinated clubs

File photo
Arrest made for armed robbery in Millet, Wetaskiwin RCMP continue to investigate

Wetaskiwin RCMP are investigating an armed robbery took place May 4, 2021 in Millet, Alta.

Dr. Karina Pillay, former mayor of Slave Lake, Alta., is shown at her medical clinic in Calgary on Friday, April 16, 2021. THE CANADIAN PRESS/Jeff McIntosh
10 years later: Former Slave Lake mayor remembers wildfire that burned through town

Alberta announced in 2011 that an unknown arsonist had recklessly or deliberately ignited the forest fire

The body of Brenda Ware, 35, was found along Highway 93 in Kootenay National Park on Thursday, May 6, 2021. (RCMP handout)
RCMP ask for tips after woman travelling from Alberta found dead in B.C. park

Brenda Ware was found along Highway 93 in the park, 54 kilometres north of the town of Radium

A caribou grazes on Baffin Island in a 2008 file photo. A last-ditch attempt to save some of Canada’s vanishing caribou herds is a step closer after a scientific review panel’s approval of a plan to permanently pen some animals and breed them to repopulate other herds. THE CANADIAN PRESS/AP-Kike Calvo via AP Images
Parks Canada captive caribou breeding proposal gets OK from scientific review panel

Wolf density in Jasper is low enough that the animals would not be expected to be a major threat

Most Read