Specialist John McNierney, centre, works with traders at his post on the floor of the New York Stock Exchange, Monday, Nov. 16.Richard Drew/The Associated Press
Canadian stocks rose on Wednesday as Canadian Pacific Railway Ltd. rallied on merger prospects and Valeant Pharmaceuticals International Inc. rebounded from a two-year low.
Canadian Pacific surged 5.56 per cent to a three-week high as the railroad operator went public with its pursuit of Norfolk Southern Corp., wooing the U.S. company's shareholders with an offer of about $28-billion that would create a transcontinental railroad.
The Standard & Poor's/TSX Composite Index rose 119.6 points, or 0.9 per cent, to 13,399.97 in Toronto. The benchmark Canadian equity gauge has alternated between gains and losses for three days. It fell Tuesday after snapping the longest losing streak in more than a decade Monday. The S&P/TSX has declined 8.7 per cent this year, trailed only by Singapore and Greece among developed markets.
Canadian equities have faltered this year amid declines in commodity and health-care stocks of at least 19 per cent. The country's equity market has been hampered by a slump in oil prices, slowing overseas growth and the prospect of an interest- rate increase from the Federal Reserve.
Valeant Pharmaceuticals jumped 3.58 per cent, rebounding from the lowest since July 2013. Valeant, briefly the largest stock in Canada by market capitalization this year, has lost 72 per cent from an Aug. 5 high amid pressure over how it prices its drugs. Concordia Healthcare Corp., which has dropped 58 per cent since Sept. 4, surged 8.86 per cent Wednesday.
Teck Resources Ltd. added 0.96 per cent after the diversified miner lowered its 2016 spending plan by $650-million and said it will eliminate a further 1,000 jobs, including senior management positions. The latest cuts raise the total to about 2,000 in the past 18 months. The decision is a "major positive" for shares and should ease concerns about cash flow generation, according to a report from FBR Capital Markets analyst Lucas Pipes.
The S&P/TSX Capped Energy sector was the lone sector to decline, falling 0.32 per cent.
Suncor Energy, the country's largest oil and gas producer, declined 2.83 per cent after it said 2016 capital spending will increase and production will slip. Canadian Oil Sands Ltd, which Suncor has offered to buy, declined 4.87 per cent .
Enbridge Inc advanced 1.31 per cent and TransCanada Corp gained 1.55 per cent.
In New York, the Standard & Poor's 500 Index rallied the most in almost a month as Federal Reserve meeting minutes signalled policy makers think the economy is strengthening enough to withstand higher interest rates as soon as next month, while stressing the pace of any increases will be gradual.
Gains among banks and biotechnology companies led a rally as eight of the S&P 500's 10 main industries rose more than 1.2 per cent. A cluster of deal activity ranging from railroads to food manufacturers also helped lift equities Wednesday.
The Standard & Poor's 500 Index added 1.6 per cent to 2,083.54, with the gauge rising above its average price during the past 200 days. The Dow Jones industrial average rose 246.99 points, or 1.41 per cent, to 17,736.49, while the Nasdaq Composite added 89.19 points, or 1.79 per cent, to 5,075.20.
"Now the question is going to be what it should have been along -- not when, but how far and how fast," said John Canally, chief economic strategist at LPL Financial Corp. in Boston. "They've been trying to communicate not just that the Fed is going to hike in December, but that the dot plots path will be lowered, and that's a good outcome for the market."
Fed officials inserted language into their October statement to stress that "it may well become appropriate" to raise the benchmark lending rate in December and largely agreed that the pace of increases would be gradual, minutes of the meeting showed.
"Members emphasized that this change was intended to convey the sense that, while no decision had been made, it may well become appropriate to initiate the normalization process at the next meeting," the minutes said. A majority of Fed officials have signaled they expect to raise interest rates this year for the first time since 2006.
Equities rallied ahead of the minutes as policy makers earlier signalled confidence in the economy and stuck to the message that rate increases will not be hurried. The S&P 500 had fallen as much as 4 per cent after Fed Chair Janet Yellen earlier this month reminded investors that raising rates in December was a "live possibility," and jobs data showed the biggest increase in hiring this year. The gauge has since pared its drop since Ms. Yellen's comments to a 1.3-per-cent decline.
Federal Reserve Bank of Atlanta President Dennis Lockhart said Wednesday he's comfortable with raising rates soon, and the path of increases will be shallow and slower than in the past. His remarks came during a panel at a Clearing House event in New York. Traders are pricing in a 66-per-cent probability of a move -- odds that shot up after a stronger-than-expected October jobs report on Nov. 6.
As policy makers assess the strength of the economy, data today showed new-home building declined more than projected in October, led by a slump in apartment construction. On the positive side, construction permits for single-family homes increased the most since 2007, indicating ground-breaking will rebound in coming months.
"It's the pace and the duration now that's the topic of conversation as opposed to when liftoff will take place," Kevin Mahn, president of Parsippany, NJ.-based Hennion & Walsh Asset Management Inc., said in phone interview. "The next thing the bull market needs is reassurance from the Fed that the economy is on stable ground, and that will come in the form of a rate hike."
Oil was little changed in New York after falling below $40 (U.S.) a barrel for the first time since August as producers' output swelled global inventories to a record.
U.S. crude stockpiles climbed to 487.3 million barrels last week, the highest for this time of year since 1930, government data show. Oil inventories have expanded to almost 3 billion barrels because of growing output in OPEC and elsewhere, the International Energy Agency said in a report on Friday.
Crude has dropped by almost half in the past year as the Organization of Petroleum Exporting Countries pumped above its collective quota and Russian output rose to a post-Soviet high, outpacing demand growth. Iran is pushing to regain oil sales lost to sanctions after agreeing in July to accept limits on its nuclear work in return for market access.
"There's a massive inventory overhang so the market will remain very soft," said Adam Wise, who helps run a $7-billion oil and natural gas bond and private equity portfolio as a managing director at John Hancock in Boston. "There's still inventory growth, Iran is planning to boost output by 500,000 barrels, there's no sign OPEC will come to an agreement on Dec. 4, and there are demand concerns in Europe and Asia.
WTI for December delivery gained 8 cents to settle at $40.75 a barrel on the New York Mercantile Exchange. Futures dropped as much as 1.9 per cent to $39.91 earlier, the lowest intraday price since Aug. 27. The volume of all futures traded was 21 percent above the 100-day average.
Brent for January settlement rose 57 cents, or 1.3 per cent, to end the session at $44.14 a barrel on the London-based ICE Futures Europe exchange. The European benchmark crude closed at a $2.19 premium to January WTI.
U.S. crude supplies are more than 100 million barrels above the five-year seasonal average, Energy Information Administration data show. Inventories at Cushing, Okla., the delivery point for WTI futures and the nation's biggest oil- storage hub, rose 1.5 million barrels last week.
"It looks like the drop in WTI is a reaction to the further build in crude stocks at Cushing," said Tim Evans, an energy analyst at Citi Futures Perspective in New York. "Brent doesn't seem to mind, which is a good sign that's the case."