Canadian stocks rose for a third consecutive day on Wednesday , as energy and financial stocks climbed amid higher oil prices and increasing speculation that the recent sell-off was overdone.
The Standard & Poor's/TSX Composite Index rose 2.5 per cent to 12,867.2 in Toronto. A three-day rally has boosted the benchmark index's performance to be the best this year among 24 developed equity markets tracked by Bloomberg.
Equities worldwide advanced after a report showed wholesale prices in the U.S. unexpectedly increased in January and manufacturing output climbed by the most since July. Canadian equities also followed a trend in global markets where some of this year's most beaten-down sectors -- energy, financial and consumer shares -- led the rally on Wednesday.
Financial stocks contributed to Wednesday's rally. Manulife Financial Corp. gained 7.5 per cent, while Royal Bank of Canada added 2.2 per cent.
Energy producers rallied the most out of 10 S&P/TSX groups, increasing 5.8 per cent, as oil prices shot up to around $30 a barrel. Canadian Natural Resources Ltd. and Suncor Energy Inc. jumped more than 6 per cent.
First Quantum Minerals Ltd. jumped 25.6 per cent and Teck Resources Ltd. rose 18.6 per cent as copper prices climbed.
Bombardier Inc. surged 21.1 per cent, the most since December, as the manufacturer won a crucial order for its new C Series jet from Air Canada. The company also revealed a plan to cut 7,000 jobs and said it plans a reverse stock split. Meanwhile, Air Canada retreated 12.1 per cent.
Consumer discretionary companies advanced for a third consecutive day. Intertain Group gained 6.5 per cent, while Restaurant Brands International added 0.8 per cent.
Shares in e-commerce company Shopify gained 7.9 per cent after posting strong quarterly results and 2016 forecasts.
U.S. stocks also rallied, with the Dow Jones Industrial Average rising more than 250 points, as the year's most-battered shares continued to recover and energy shares climbed with oil prices.
The Standard & Poor's 500 Index rose 1.6 per cent to 1,926.70 in New York, capping its first three-day advance this year and closing at a two-week high. West Texas Intermediate crude futures surged, briefly topped $31 a barrel.
The Dow Jones industrial average was up 255.37 points, or 1.58 per cent, to 16,451.78, while the Nasdaq Composite had added 98.11 points, or 2.21 per cent, to 4,534.07.
"If you accept the notion that you can never call an absolute bottom, but you can say you're in a bottoming process, bearish sentiment is a key gauge for why investors are getting back in there and buying," said David Sowerby, a portfolio manager at Loomis Sayles & Co. The firm oversees about $230-billion. "This move, if anything, is on washed-out sentiment being yet again a usual bottoming indicator."
Equity gains are coming virtually as fast as the losses that sent the S&P 500 to its worst start to any year, with almost half of 2016's decline made up in three days. The rally today occurred as oil climbed more than 5 percent, Federal Reserve officials expressed caution on the economy and data on manufacturing was better than forecast.
This year's most beaten-down industries have bolstered the gains since the main U.S. equity index closed at a 22-month low last Thursday, amid a sense that the selling was overdone. Banks in the benchmark are up 9.7 per cent in the last three sessions, recovering from the lowest level since 2013, while retailers have surged 7.3 per cent, rebounding from a 16-per-cent drop to begin 2016.
Other hard-hit industry groups making comebacks include automobile & auto-parts companies, and semiconductor & chip equipment makers. Among the auto-related stocks, Delphi Automotive Plc extended its three-day climb to more than 12 per cent, after dropping as much as 34 per cent this year.
In raw-materials, Freeport-McMoRan has soared more than 46 per cent since Thursday, erasing a 2016 decline that reached 39 per cent at its worst point in January. DuPont Co. rose 2.9 per cent, trimming its drop this year to 9 per cent after losing as much as 23 per cent.
The S&P 500 is down 9.6 per cent from its May record, and had dropped as much as 14 per cent this year amid concerns that weakness in China and falling commodity prices portend a deepening global slowdown. Just in the last three sessions, the benchmark has pared its February retreat to less than 1 per cent after sinking as much as 5.7 per cent.
"A large proportion of the rout we saw in the first six weeks of the year was overdone, particularly with regards to banks," said Peter Dixon, an economist at Commerzbank AG in London. "Does it mean the selloff is over? No clearly not, but it's definitely a positive signal. You get this significant divergence between the market perception and reality, which over time will close, and that's why we are seeing the rally we are seeing and it gives you some hope."
Minutes released Wednesday from the Fed's latest meeting showed policy makers expressed concern that the fall in commodity prices and the rout in financial markets increasingly posed risks to the U.S. economy. That was a sentiment Chair Janet Yellen echoed in testimony before lawmakers last week, as she signalled the central bank could delay its plans for tighter policy to assess how the economy reacts to current headwinds.
Mining shares are adding to this year's rebound with the best four-day rally since 2009 as Freeport- McMoRan Inc. surges. Copper prices had the longest stretch of gains since December.
A gauge of 18 large base metal producers tracked by Bloomberg Intelligence rose 8 percent on Wednesday, with the measure heading for a jump of 22 per cent over four sessions. Freeport, the world's largest publicly traded copper producer, soared 12 per cent, taking the advance over three days to 47 per cent. That's the biggest such increase in records starting in 1995.
The BI measure of producer shares is rebounding from an all-time low reached last month. Investors are returning to industrial metals on optimism that the production cuts announced by Freeport, Glencore Plc and others will finally start to erode global gluts. Copper inventories are shrinking, while gains Wednesday for global equities and crude oil helped to bolster the economic outlook.
"Metals might be supported recently by quite a few factors including the recovering stock market and oil market," said Richard Fu, head of Asia & Pacific at Amalgamated Metal Trading Ltd. in London. Lower stockpiles are also supporting prices, he said.
Copper futures for May delivery climbed 1.1 per cent to settle at $2.079 a pound on the Comex in New York. Prices rose for a third straight session, the longest streak since Dec. 11.
Futures fell 24 per cent last year, the biggest annual loss since 2008, as the slowest economic expansion in China in more than a generation heightened demand concerns. Now, output cuts may be finally starting to help tighten supplies. Inventories tracked by the London Metal Exchange dropped 2.1 per cent on Wednesday to 209,875 metric tons, the biggest decline since May 2014. The stockpiles have fallen 11 per cent in 2016.
Freeport jumped as much as 19 per cent Wednesday in New York trading. The BI Global Large Base Metals Competitive Peer Group added as much as 8.5 per cent, and Anglo American Plc gained as much as 18 per cent.
Crude oil rose after Iran said it supported a proposal by Saudi Arabia and Russia that would freeze production at near-record levels, without saying whether it would curb its own output.
Futures surged 5.6 per cent in New York. Iran's Oil Minister Bijan Namdar Zanganeh met with counterparts from Iraq, the second-biggest OPEC producer, Qatar and Venezuela following the output agreement in Doha Tuesday. Iran supports the proposal, Zanganeh said, according to the Shana news agency. He didn't mention if the nation would deviate from plans to restore exports after the lifting of sanctions last month.
"The fact that they had a meeting and it ended cordially is reason enough for a gain," said John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy. "These countries are supposed to be at each other's throats, so it's something."
Oil has dropped 23 per cent since the Organization of Petroleum Exporting Countries effectively abandoned output targets at a Dec. 4 meeting. Iran, the second-biggest OPEC producer before sanctions were intensified in 2012, is seeking to boost output by 1 million barrels a day and regain market share. The nation has loaded its first cargo to Europe.
West Texas Intermediate oil for March delivery rose $1.62 to settle at $30.66 a barrel on the New York Mercantile Exchange. It's the highest close since Feb. 5. Prices sank to a 12-year low this month, extending a 30-per-cent drop last year. Total volume traded was 46 per cent above the 100-day average.
Brent for April settlement rose $2.32, or 7.2 per cent, to $34.50 a barrel on the London-based ICE Futures Europe exchange. The European benchmark was at a $1.45 premium to WTI for April delivery.
The CBOE Crude Oil Volatility Index, which measures expectations of price swings, climbed to the highest level in seven years Tuesday. The 30-day WTI historical volatility reached the highest since 2009 Wednesday, according to Bloomberg data.
"Volatility is through the roof," said Stephen Schork, president of the Schork Group Inc. in Villanova, Pennsylvania. "We're in the midst of a technical rebound. The market is oversold and using these headlines hinting at OPEC getting its act together as an excuse."
With files from Reuters