Richard Newman, left, works with fellow traders on the floor of the New York Stock Exchange, Wednesday, Feb. 3.Richard Drew/The Associated Press
Canadian stocks rebounded on Tuesday, reversing earlier losses, amid advances by materials and energy producers.
Canadian Natural Resources Ltd. and Goldcorp Inc. surged as commodity companies led a recovery in Canadian equities. Rona Inc. shares doubled after a friendly takeover deal from U.S. rival Lowe's Cos. Equities slumped earlier amid a drop in shares of Valeant Pharmaceuticals International Inc. and financial companies.
The Standard & Poor's/TSX Composite Index rose 1.2 per cent, or 150.76 points, to 12,593 in Toronto, erasing earlier losses of as much as 1 per cent. The benchmark gauge halted a two-day loss of 3 per cent that started February.
The loonie was up 1.35 U.S. cents at 72.50 cents in late aftermoon trading amid general weakness in the greenback against most major currencies and a big rebound in oil prices.
The last time the loonie closed up more than a cent was on Jan. 21, when it gained 1.02 cents, although it almost managed that feat again on Jan. 26, closing up 0.97 of U.S. cent.
Even with a 4 per cent drop so far in 2016, Canada's equity benchmark remains the second-best performing developed market in the world behind New Zealand after rallying from a 2 1/2-year low in January. The S&P/TSX also entered a bear market earlier in the month.
Raw-material companies rallied as the price of gold climbed for a fourth day to a three-month high. Yamana Gold Inc. jumped 10.2 per cent, while Alamos Gold Inc. added 4.7 per cent. Energy producers rallied with the price of crude as the falling dollar countered data showing a steep gain in U.S. inventories.
Rona shares surged 98 per cent to a eight-year high, after the home-improvement retailer agreed to sell itself to rival Lowe's for $3.2-billion in cash. Lowe's will pay $24 per share, more than double Tuesday's closing price of $11.77, according to a statement.
Indigo Books & Music Inc. jumped 17.9 per cent, the most in four years, after third-quarter earnings and revenue climbed.
Valeant, briefly the largest company in Canada by market capitalization last year, gained to erase an earlier decline of as much as 5.5 per cent after the U.S. House Oversight and Government Reform Committee released two memos late Feb. 2 detailing internal corporate documents from Valeant and Turing Pharmaceuticals on drug prices. The memos were in preparation for a hearing on skyrocketing prescription prices Thursday.
U.S. stocks rose as commodity producers rallied with crude oil, overshadowing an earlier selloff among banks and technology shares amid concerns that weakness in global growth is spreading.
The Standard & Poor's 500 Index climbed 0.5 per cent to 1,912.60 in New York, after erasing an earlier drop of 1.6 per cent.
The Dow Jones industrial average rose 182.98 points, or 1.13 per cent, to 16,336.52, while the Nasdaq Composite dropped 12.71 points, or 0.28 per cent, to 4,504.24.
"Worries about a U.S. recession have pushed the dollar lower and perhaps moved the Fed off the table," said John Canally, chief economic strategist at LPL Financial Corp. in Boston. "Because of that, coupled with OPEC news and oil moving higher, we're having highs of the day. For stocks, it's all about oil today."
Equities lurched between gains and losses as economic data rekindled worries about the strength of U.S. growth, while a tumble in the dollar helped send oil rocketing higher and boosted commodity producers.
A report showed service industries expanded in January at the slowest pace in nearly two years, raising the risk that persistent weakness in manufacturing is starting to spread to the rest of the U.S. economy. The services slowdown comes as investors are on guard for signs that weakness in China is spilling over.
A separate reading showed U.S. companies added a stronger-than-forecast 205,000 workers to payrolls in January. Focus will begin to shift to the government's January employment report Friday, which is estimated to show the economy added 190,000 jobs, according to economists surveyed by Bloomberg.
The equity benchmark halted a two-day slide to start the month, with U.S. stocks coming off their worst January since 2009 as concerns about a slowdown in China and plummeting commodity prices unnerved investors. The S&P 500 is 10 per cent below its all-time high set in May.
With the U.S. earnings season about midway through, some 80 percent of companies in the S&P 500 that have reported beat profit estimates, but less than half posted better-than-expected sales. Analysts estimate earnings at index members fell 5.6 per cent in the fourth quarter, better than Jan. 15 predictions for a 7 percent slump.
"This is an emotional, sentiment-driven market, and it's likely to remain tied to oil," said Michael James, managing director of equity trading at Wedbush Securities Inc. in Los Angeles. "Nerves are pretty frayed after yesterday's decimation with the deterioration in oil prices spilling over into equity markets."
The U.S. dollar plunged by the most since the Federal Reserve announced the start of its Treasury bond-buying program seven years ago, as signs of a slowing U.S. economy helped derail bets on diverging policies between global central banks.
The U.S. currency sank more than 1.7 per cent against six of its biggest peers amid concern that economic growth in the world's largest economy is cooling. Currency traders are catching up to the bond market, where 10-year yields sank to the lowest in a year Wednesday as futures are sending the strongest signal yet that traders expect the Fed to stand pat this year.
"The currencies market has been at odds with the rates market, and now the rates market is winning," said Peter Gorra, head of foreign-exchange trading in New York at BNP Paribas SA. "There's a disconnect where the Fed says it's four hikes while the market says it's like 0.7 hike this year -- someone is wrong."
Concern about a global demand slump and policy makers' response to a slowing growth worldwide has put the $5.3 trillion-a-day market in disarray. The dollar's pullback this week has reversed all the yen's decline against the greenback on Friday when Bank of Japan introduced negative interest rates to revive inflation, which is stuck near zero.
The Bloomberg Dollar Spot Index, which tracks the U.S. currency against 10 global peers, slumped 1.6 per cent in New York. It dropped as much as 1.9 per cent, the biggest loss since 2009 when the Fed opened another front in its battle to boost the economy by pledging to buy as much as $300-billion of Treasuries and stepping up purchases of mortgage bonds.
Oil rose as the falling U.S. dollar countered any concerns in the market over a steep gain in U.S. crude inventories to more than 500 million barrels for the first time since 1930.
Oil futures briefly retreated after the Energy Information Administration reported that U.S. crude stockpiles climbed 7.79 million barrels to 502.7 million last week. That was almost twice the 4 million-barrel increase projected by analysts surveyed by Bloomberg.
"Crude inventories are above 500 million barrels for the first time since Babe Ruth was hitting home runs in the Bronx, but the market is more interested in the dollar," said Stephen Schork, president of the Schork Group Inc. in Villanova, Pennsylvania. "The Fed is driving the crude market today, not the EIA."
Oil dropped to a 12-year low in January amid brimming U.S. crude inventories and the outlook for increased exports from Iran after the removal of sanctions. The slump continues to take its toll on oil producers: Exxon Mobil Corp. reduced its drilling budget to a 10-year low, and Chevron Corp. saw its credit rating cut by Standard & Poor's for the first time in almost three decades.
West Texas Intermediate for March delivery rose $2.40, or 8 per cent, to $32.28 a barrel on the New York Mercantile Exchange. It fell 11 per cent on Monday and Tuesday, the biggest two-day drop in almost seven years. The volume of all futures traded was 93 per cent above the 100-day average.
Brent for April settlement climbed $2.32, or 7.1 per cent, to $35.04 a barrel on the London-based ICE Futures Europe exchange. The European benchmark crude closed at an $1.18 premium to April WTI.
With a file from The Canadian Press and Reuters