North American stock markets rebound from three-day losses; loonie falls

·4 min read

TORONTO — North American stock markets rebounded from a three-day slide in a relief rally after an erratic start to the week on mounting concerns about inflation.

"It looks like the cyclical bull market is going to extend here for a while longer," said Candice Bangsund, portfolio manager for Fiera Capital.

Markets were rattled earlier in the week by reports of consumer and producer inflation beating expectations.

"But inevitably it would appear that these are indeed fleeting and will not alter the accommodating monetary policy stance from global central banks," Bangsund said in an interview.

A pullback in the energy sector caused the S&P/TSX composite index to lag its U.S. counterparts, closing up just 28.04 points to 19,135.81.

In New York, the Dow Jones industrial average was up 433.79 points at 34,021.45. The S&P 500 index was up 49.46 points at 4,112.50 while the Nasdaq composite was up 93.31 points at 13,124.99.

The rally was accompanied by a rotation from growth sectors like technology to so-called cyclical and value-oriented sectors that thrive amid an economic recovery.

Seven of the 11 major sectors on the TSX were higher, including consumer discretionary, financials and industrials.

Discretionary led as blowout earnings from Canadian Tire Corp. Ltd. pushed its shares up 10.6 per cent.

Despite a dip in bond yields, the heavyweight financials sector was up 1.3 per cent as Canada's big banks saw their shares rise by as much as 2.5 per cent on the day.

Bangsund said investors might be taking advantage of the recent pullback in cyclically oriented sectors to buy shares as part of the reflationary rotation narrative playing out.

Industrials climbed with shares of WSP Global Inc. increasing 9.2 per cent after reporting strong quarterly results.

The main outlier was energy, which fell two per cent as crude oil prices dropped 3.4 per cent.

The June crude contract was down US$2.26 at US$63.82 per barrel and the June natural gas contract was up less than a penny at US$2.97 per mmBTU.

Crescent Point Energy Corp. was down 6.5 per cent, Vermilion Energy Inc. decreased 6.4 per cent and MEG Energy Corp. was 5.9 per cent lower.

Crude prices fell after the Colonial Pipeline was set to return to service, alleviating some of the restraint on supply.

Investors appear unfazed by ongoing high COVID-19 infections in India and South America that would reduce demand, Bangsund said, as they mainly focus on positive signals in developed economies, including lower case numbers, ramped up vaccinations and progress in the economic reopening in the U.S. and Britain.

The U.S. reported that jobless claims fell last week to 473,000, a new pandemic low.

The U.S. Centers for Disease Control and Prevention said on Thursday that fully vaccinated people no longer need to wear a face mask or remain two metres away from others in most settings.

"Europe, Canada is likely to follow, so in the developed economies the end of the pandemic is in sight, though of course in the emerging world it's a different story."

The Canadian dollar traded for 82.30 cents US compared with 82.67 cents US on Wednesday.

Although Nasdaq bounced back, Canada's tech sector continued to fall as Shopify Inc. and Lightspeed POS Inc. lost 3.4 and 3.1 per cent, respectively.

Materials also dipped on a decrease in copper prices, pushing Turquoise Hill Resources Ltd. off 18.5 per cent and Pan American Silver Corp. down 10.3 per cent.

The June gold contract was up US$1.20 at US$1,824.00 an ounce and the July copper contract was down 4.55 cents at US$4.69 a pound.

"With both consumer and producer prices accelerating, this is added to signs of near-term pricing pressures and boosted gold prices due to its role as an inflationary hedge in the portfolio setting," Bangsund said.

This report by The Canadian Press was first published May 13, 2021.

Companies in this story: (TSX:PAAS, TSX:TRQ, TSX:SHOP, TSX:LSPD, TSX:WSP, TSX:BMO, TSX:MEG, TSX:CPG, TSX:VET, TSX.CTC.A, TSX:GSPTSE, TSX:CADUSD=X)

Ross Marowits, The Canadian Press

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