The Toronto stock market was higher Monday as optimism that the Federal Reserve won’t move quickly to ease economic stimulus measures persuaded buyers to nibble at stocks beaten down in a series of declines.
The S&P/TSX composite index was 114.57 points higher to 12,301.93.
The Canadian dollar was unchanged at 98.34 cents US.
U.S. indexes were also well into positive territory as traders hope a two-day Fed meeting on interest rates which starts Tuesday will provide some clarity on central bank intentions.
The Dow Jones industrials jumped 174.8 points to 15,244.98, the Nasdaq climbed 42.25 points to 3,465.8 and the S&P 500 was ahead 18.15 points to 1,644.89.
Markets have been volatile since late May when Fed chairman Ben Bernanke first mentioned that the central bank would consider cutting back on its $85-billion of bond purchases each month if economic data – particularly job growth – improved.
The stimulus measures, known as quantitative easing, have been popular as they have kept interest and bond yields low and kept a rally going on stock markets practically non-stop since late last year.
Craig Fehr, Canadian markets specialist at Edward Jones in St. Louis, said there’s a growing sense that the Fed will move slowly when it withdraws stimulus.
“I think the market is starting to warm up to the idea that the tapering is a very deliberate word – there’s going to be a slow, wind down of monetary policy that is not sustainable,” Fehr said.
Speculation on the Fed tapering its bond purchases has depressed equity markets and markets in Toronto and New York retreated more than one per cent last week. At the same time, bond yields have been rising, pushing mortgage rates higher. And that has raised worries that rising rates could derail the recovery in the housing sector.
Investors were encouraged by data Monday showing most U.S. homebuilders are optimistic about home sales during May.
The National Association of Home Builders/Wells Fargo builder sentiment index released Monday leaped to 52 this month from 44 in May. The index hasn’t been that high since April 2006, just before the housing market collapsed.
In corporate news, Brookfield Asset Management Inc. is selling its Longview forestry assets in the U.S. Pacific Northwest through deals totalling nearly $3.7-billion. Weyerhaeuser Co. will acquire Brookfield’s Longview Timber for $2.65-billion. KapStone Paper and Packaging will acquire Longview Fibre Paper and Packaging for $1.025-billion from the Toronto-based company. Brookfield shares rose 89 cents to $36.84.
Most TSX sectors were higher with the consumer staples sector the biggest advancer, up 1.6 per cent with Shoppers Drug Mart ahead $1.21 to $43.19.
Commodity prices were mixed Monday and the energy sector gained 1.46 per cent as July crude on the New York Mercantile Exchange gained 16 cents to $98.01 a barrel. Canadian Natural Resources advanced 60 cents to C$29.80.
July copper was unchanged at $3.20 a pound and the base metals sector was ahead 0.6 per cent. First Quantum Minerals was ahead 13 cents to C$17.04.
Financials also provided lift with Scotiabank up 58 cents to $57.40.
Interest-rate sensitive groups were also higher following some steep losses. Sectors such as real estate, telecoms and utilities have been punished lately as speculation about cutting back on the QE program has had the effect of pushing U.S. Treasury yields sharply higher.
The telecom sector has also been pressured after Ottawa quashed the idea that big telecoms could take over the spectrum of smaller players. Federal Industry Minister Christian Paradis said current rules would stand, leading to Telus Corp. to abandon its plan to buy Mobilicity.
On Monday, Telus advanced 23 cents to $34.95.
The utilities component was ahead 0.8 per cent as TransAlta Corp. gained 22 cents to $13.86.
August bullion fell $4.60 to $1,383 an ounce and the gold sector was slightly lower. Barrick Gold Corp. faded 12 cents to $19.72.
Markets also found support from a solid showing from the latest reading of manufacturing in the U.S. Northeast. The Empire manufacturing index rose more than expected in June, to plus-7.8 from minus-1.4 in the prior month.
However, results of the survey were mixed as the new orders and shipments balances components fell further into negative territory. The employment balance also fell.
“Overall, the rise in sentiment on the headline balance is encouraging,” said CIBC senior economist Andrew Grantham.
“But we will need to see firm indicators of orders and shipments improving as well to say that U.S. manufacturing has really turned a corner.”
European bourses were higher as London’s FTSE 100 gained 0.8 per cent, Frankfurt’s DAX was up 1.38 per cent and the Paris CAC 40 rose 1.68 per cent.
Elsewhere on the economic front, Statistics Canada says non-resident investors acquired $14.9-billion of Canadian securities in April, adding both debt and equity securities to their holdings. It says foreign investment in Canadian securities was led by debt instruments, mainly reflecting private corporate bonds and the first acquisition of money market instruments in 2013.
Non-residents invested $12.8-billion in Canadian debt securities in April, the largest investment since May 2012.