TSX gets lift from financials, U.S. markets rise to highest levels since March

TSX gets lift from financials, U.S. markets rise to highest levels since March

TORONTO — Canada’s main stock index got a lift from the heavyweight financials sector, while U.S. markets surged to their highest levels in more than two months on improving sentiment from economic reopenings.

That prompted a rotation by investors on Tuesday towards beaten up cyclicals and away from stocks that benefited from COVID-19, including technology and those that got a lift from the shift to working from home, said Sid Mokhtari, executive director of institutional equity research at CIBC.

That rotation has benefited financials and energy while some of the value names in Canada also performed well.

“This is typically a good, healthy sign of a market that is trending,” he said.

Similar moves within the equity markets were seen off lows in 2016 and 2011.

Economic reopenings have led the shift in sentiment with markets pricing in the possibility of additional infection flare-ups.

“This market, to some extent, is digesting all that,” said Mokhtari.

The S&P/TSX composite index closed up 72.70 points at 15,148.12.

Financials gained nearly five per cent as shares of the country’s largest banks increased between 5.1 and 9.2 per cent.

The Bank of Nova Scotia rose 7.4 per cent as it was the first Canadian bank to report results this quarter. Although COVID-19 prompted a more than doubling of provisions for credit losses, its adjusted profit exceeded analyst forecasts.

Heading into the quarter, the banking sector wasn’t expected to perform well amid anticipated increases in provisions and very low interest rates.

The sector has lagged and is among the TSX’s “weakest links,” said Mokhtari, but a lot of the bad news has already driven down bank share prices.

Consumer discretionary was helped by an 11 per cent increase from BRP Inc., while energy gained 1.3 per cent with Vermilion Energy Inc. up 8.3 per cent.

The July crude contract was up US$1.10 at US$34.35 per barrel and the July natural gas contract was up 6.4 cents at US$1.945 per mmBTU.

The Canadian dollar traded for 72.44 cents US compared with 71.51 cents US on Monday.

Crude oil and the loonie reached their highest levels since early March on growing fuel demand and a lower U.S. dollar.

The technology, materials and health care sectors fell the most Tuesday. Technology was down 5.2 per cent as Shopify Inc. lost 11 per cent. Materials was down 4.3 per cent with Barrick Gold Corp. off 7.6 per cent on lower gold prices.

The June gold contract was down US$29.90 at US$1,705.60 an ounce and the July copper contract was up 3.2 cents at nearly US$2.42 a pound.

Health care lost some ground as cannabis producers Hexo Corp. and Aurora Cannabis Inc. were down 11 and six per cent respectively.

In New York, the Dow Jones industrial average was up 529.95 points, or 2.2 per cent, at 24,995.11 as trading resumed following the Memorial Day holiday.

The S&P 500 index was up 36.32 points at 2,991.77. It cleared 3,000 points during intraday trading, which is viewed as a key technical level and a sign that its recovery has longevity heading into the summer.

Meanwhile the Nasdaq composite was up 15.63 points at 9,340.22.

Also supporting U.S. markets on Tuesday was growing hope for a coronavirus vaccine, said Mokhtari, pointing to several pharmaceutical giants testing potential vaccines.

“The sentiment is changing rapidly about the vaccine situation. I think investors, at least, are coming with this notion that given scientific innovations and technological innovation, something’s going to come out of this hopefully.”

This report by The Canadian Press was first published May 26, 2020.

Companies in this story: (TSX:DOO, TSX:BNS, TSX:VET, TSX:SHOP, TSX:ABX, TSX:HEXO, TSX:ACB, TSX:GSPTSE, TSX:CADUSD=X)

Ross Marowits, The Canadian Press

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