Traders work on the floor of the New York Stock Exchange shortly after the opening bell in New York April 12.© Lucas Jackson / Reuters
Canadian stocks rose a fourth day, extending a rally to near 10-month highs, as energy producers advanced with crude to offset a slump in Valeant Pharmaceuticals International Inc.
The S&P/TSX Composite Index rose 0.63 per cent, or 89.45 points, to 14,365.61 in Toronto, logging its highest close since Aug. 11. The index is up over 21 per cent from its Jan. 20 low, after climbing out of a bear market on Friday, amid its longest winning streak in almost eight weeks.
The recent rally has added to Canadian shares' more expensive valuation relative to their U.S. peers. The S&P/TSX now trades at 21.8 times earnings, about 11 per cent higher than the 19.6 times valuation of the S&P 500 Index.
Canadian equities have been one of the top-performing markets this year, second only to New Zealand among developed nations with a 10-per-cent advance, a sharp rebound after falling the most in 2015 since the 2008 financial crisis. Raw-materials producers have led the broader rally, soaring 44 per cent this year for the best year-to-date performance in three decades.
Global stocks advanced a fourth day with U.S. equities on pace to reach a 10-month high. Federal Reserve Chair Janet Yellen said Monday she expects to raise interest rates gradually and held off from specifying any timeframe. Traders are pricing in a 20 -per-cent chance for an increase in July, down from better than 50-per-cent odds a day ahead of the jobs report last week, according to data compiled by Bloomberg.
In Canada, Baytex Energy Corp. and MEG Energy Corp. climbed more than 12.7 per cent to lead a 2.9-per-cent gain in energy producers. Oil closed above $50 a barrel in New York for the first time in more than 10 months as U.S. crude stockpiles are estimated to have fallen for a third week, trimming a glut.
Penn West Petroleum Ltd. soared 13.21 per cent for a third day of gains. The oil and gas producer has jumped almost 40 per cent in that time after Bloomberg first reported on Friday Penn West has hired Royal Bank of Canada to sell its Dodsland Viking light oil assets in Saskatchewan, according to people familiar with the deal.
Cott Corp. added 9.96 per cent to the highest level in more than 10 years, after the water and pop beverage bottler agreed to buy European home and office services business Eden Springs in a €470-million ($534-million) deal.
Valeant sank 14.95 per cent, after the drugmaker's delayed first-quarter earnings were short of analysts' expectations, and the company slashed forecasts. Earnings for 2016 are now expected to be $6.60 to $7 a share, excluding some items, down from March estimates of $8.50 to $9.50. Revenue in two key categories, dermatology and prescription ophthalmology, slumped by 43 per cent and 30 per cent, respectively.
The S&P 500 inched closer to its record high on Tuesday, helped by a big jump in energy shares and enthusiasm following Ms. Yellen's speech this week.
The Dow Jones industrial average rose 19.52 points, or 0.11 per cent, to 17,939.85, the S&P 500 gained 2.8 points, or 0.13 per cent, to 2,112.21 and the Nasdaq Composite dropped 6.96 points, or 0.14 per cent, to 4,961.75.
"Equity markets have remained very resilient despite the bad payrolls figure that we got on Friday and it seems like sentiment's in a pretty good place," said Jon Adams, portfolio manager at BMO Global Asset Management in Chicago, where he helps oversee $217-billion. "It is significant that the S&P is so close to that May 2015 high but earnings are expected to pick up significantly later this year. We've seen weak earnings for four quarters in a row, so we really need to see some growth on the top line side to justify where we're at right now."
Stocks rose Monday after Ms. Yellen said the economy is making progress despite signs of slower jobs growth, making investors more comfortable with the prospects for gradual rate increases. That's helped fuel gains in commodity prices. Traders have also cut back their bets for a Fed rate increase after last week's disappointing jobs report. They are now pricing in almost no chance of a boost in June, and the probability for July has dropped to about 18 percent from 53 percent a week ago.
Energy stocks posted the biggest gains, rising to the highest level since November, as oil advanced before U.S. government data forecast to show crude stockpiles dropped for a third week. All but three stocks in the S&P 500 Energy Index advanced.
MSCI's global index rose 0.7 per cent, set to close at its strongest level since April 20. The Stoxx Europe 600 Index climbed the most in two weeks. Germany's benchmark DAX Index was among the best-performing western-European markets after data showed industrial output in the nation rebounded in April
The MSCI Emerging Markets Index rose 1.8 per cent, the most since March 30 on a closing basis. The Philippine Stock Exchange Index rallied 1.5 per cent . South Korea's Kospi climbed 1.3 per cent.
The Bloomberg Commodity Index advanced 0.2 per cent for a fifth straight gain, the longest run since March. It's now at a seven-month high, having ended Monday more than 20 per cent above its January low. A four-year bear market that pushed raw materials to the lowest level in a quarter century has drawn to an end after supply constraints drove a recovery from soybeans to zinc.
Gold slipped 0.1 per cent, trimming this month's advance to 2.5 per cent, as traders anticipate rate hikes this year even if they are gradual. Copper fell 2.2 per cent as data showed the biggest two-day increase in stockpiles since 2004, while aluminum declined 0.2 percent
West Texas Intermediate oil rose 1.4 per cent to the highest settlement since July 21. Inventories declined by 3 million barrels last week in the U.S., according to a Bloomberg survey before a report from the Energy Information Administration on Wednesday. Royal Dutch Shell Plc said it won't attempt to repair a key pipeline in Nigeria for now after militants attacked it a second time last week.
Crude has surged about 90 per cent from a 12-year low in February amid unexpected disruptions and a continuous slide in U.S. output, which is under pressure from the Organization of Petroleum Exporting Countries' policy of pumping without limits. Saudi Arabia will maintain the same level of production capacity until 2020 under a new economic reform plan approved by the government to reduce its reliance on oil.
"The path of least resistance for crude is still higher and outages in Nigeria and expectations of strong EIA data tomorrow are helping the trend," said Clayton Rogers, an energy derivative broker at SCS Commodities Corp. in New Jersey. "I think the real story is just how range-bound this market is."
WTI for July delivery rose 67 cents to close at $50.36 a barrel on the New York Mercantile Exchange. Prices are up 36 per cent this year.
Brent for August settlement rose 89 cents, or 1.8 per cent, to $51.44 a barrel on the London-based ICE Futures Europe exchange. It was the highest close since Oct. 9. The global benchmark crude ended the session at a 52-cent premium to August WTI.
Energy companies accounted for nine of the ten biggest gainers on the Standard & Poor's 500 Index. The S&P 500 Oil & Gas Exploration and Production Index was up as much as 3 per cent to the highest level since November during the day's trading.
"My concern is that you've already built a lot of good news into the price," said Bill O'Grady, chief market strategist at Confluence Investment Management in St. Louis, which oversees $4.3=billion. "We may soon have discounted all the positive news."
With files from Reuters