A trader works on the floor of the New York Stock Exchange shortly before the closing bell in New York July 2, 2014.LUCAS JACKSON/Reuters
The Toronto stock market soared more than 300 points Wednesday afternoon with sentiment helped along by reassurance on interest rates from the U.S. Federal Reserve.
The S&P/TSX composite index jumped 355.61 points to 14,217.13, its second straight triple-digit advance as traders continued to buy up stocks oversold during the course of a steep fall sell-off triggered by plunging oil prices.
The Canadian dollar gained 0.29 of a cent to 86.23 cents US as the greenback weakened after the Federal Reserve promised to be "patient" in determining when to raise its key interest rate. The Fed said that this "patient" approach is consistent with what it called its "previous" guidance that it expected to keep the rate near zero for a "considerable time."
It's generally expected the Fed will move to hike rates sometime next year, around mid-2015. But a series of strong economic data points, including November's blowout employment report, had suggested the Fed could move to increase rates sooner than expected.
The Fed also said that the timing of such increases depends on economic data.
U.S. indexes also bounded ahead as the Dow Jones industrials gained 279.9 points to 17,348.77, the Nasdaq rose 77.26 points to 4,625.09 and the S&P 500 index lifted 37.2 points to 2,009.94.
The gain on the TSX built on a solid, 156-point advance Tuesday as bargain hunters started to move in. The energy sector was the biggest beneficiary, rising eight per cent. But gains also spread to other areas such as financials, up 1.2 per cent. The sector had sold off on concerns about the impact of falling oil prices on the Canadian economy and the exposure of banks to high-cost producers that took on a lot of debt to finance expansion.
Leadership also came from industrials, ahead 2.1 per cent.
Oil prices were positive for a second day Wednesday, raising hopes that a bottom is approaching to the plunge in oil prices. The price of crude has collapsed, falling over 50 per cent from summertime highs as the market sorts out a huge supply/demand imbalance. The TSX energy sector was up another five per cent as oil in New York moved up $1.32 to US$57.25 a barrel.
Several companies have cut their capital expenditure budgets and cut dividends in response to the fall in oil prices.
On Wednesday, Husky Energy Inc. (TSX:HSE) says its 2015 capital budget will be $3.4 billion, about $1.7 billion less than it expects to spend this year on major projects. Its shares climbed $2.31 to $25.67.
Penn West Petroleum Ltd. (TSX:PWT) is cutting its dividend from 14 cents to three cents a share starting in April 2015. It is also reducing its 2015 capital budget to $625 million, which is $215 million or about 26 per cent less than anticipated in Penn West's previous guidance issued Nov. 17. Its stock has been a major casualty of the drop in the energy sector this fall, down 43 per cent just in the past six weeks. But on Wednesday, it ran up nine per cent to $2.56.
A major gainer was Sherritt International, (TSX:S) which charged ahead 58 cents or 25.5 per cent to $2.85. Sherritt is a major investor in Cuba and its stock took off after President Barack Obama vowed "a new approach to Cuba." He detailed steps to begin normalizing relations with Cuba, including establishing a U.S. embassy in Havana and lifting many restrictions on travel and money transfers.
The base metals group gained seven per cent with March copper up one cent to US$2.87 a pound.
February bullion gained 20 cents to US$1,194.50 an ounce and the gold sector climbed 3.3 per cent.