Canadian stocks rose on Wednesday along with crude oil, as energy and raw-materials producers climbed, offsetting a slump in technology shares.
The benchmark Standard & Poor's/TSX Composite Index increased 0.57 per cent, or 78.22 points, to 13,887.66 in Toronto. The gauge halted the longest losing streak in three weeks on Tuesday, and is neck-and-neck with New Zealand as the best-performing developed market in the world this year, with a 6.7-per-cent gain.
Oil closed above $45 (U.S.) a barrel in New York for the first time since November after U.S. crude output dropped and Federal Reserve policy makers signalled they're open to raising interest rates in June.
Seven of the S&P/TSX's 10 industries advanced, with utilities and raw-materials rising at least 1.3 per cent. Energy producers climbed 1.1 per cent, after rallying as much as 1.8 per cent. Cenovus Energy Inc. added 1.6 per cent after reporting lower production and operating costs in the first quarter from year-ago levels, offsetting a wider operating loss than analysts expected. The oil and gas producer said the quarterly results are not indicative of potential performance for the rest of the year.
Potash Corp. of Saskatchewan Inc. added 2.3 per cent before its earnings report on Thursday, while Goldcorp Inc. gained 1.9 per cent as gold prices climbed for a third day.
Companies including BP Plc, Nabors Industries Ltd. and explorer Pioneer Natural Resources Co. have all said in the past 24 hours that prices above $50 will help drive a recovery in the oil industry, while The World Bank boosted its forecast for oil prices this year to an average of $41 a barrel, up from a January forecast of $37.
The resource-dominant S&P/TSX remains closely linked to moves in commodities prices, with a 17-per-cent rally in the benchmark equity gauge from a Jan. 20 low aligning with a rebound in crude from the lowest levels since 2003. Raw-materials and energy producers are the two top-performing industries in Canada so far this year, up more than 13 per cent.
The Canadian benchmark now trades at 22.1 times earnings, about 15 per cent higher than the 19.2 times earnings valuation of the Standard & Poor's 500 Index, according to data compiled by Bloomberg.
DH Corp. sank 9.5 per cent, the most since October, after the financial technology services company posted first-quarter earnings short of the lowest analyst estimate, while revenue also fell short. Technology shares declined 1.3 per cent as a group.
U.S. stocks ended slightly higher on Wednesday after fears eased that the Federal Reserve would strongly signal it would raise interest rates in June, though a slump in Apple shares weighed on the Nasdaq index.
The Dow Jones industrial average rose 52.74 points, or 0.29 per cent, to 18,043.06, the S&P 500 gained 3.62 points, or 0.17 per cent, to 2,095.32 and the Nasdaq Composite dropped 25.14 points, or 0.51 per cent, to 4,863.14.
The Federal Open Market Committee omitted previous language that "global economic and financial developments continue to pose risks," tacitly nodding to improvement in financial markets, and instead said officials will "closely monitor" such developments. The Fed left its benchmark interest rate unchanged. The committee reiterated that it will probably raise rates at a "gradual" pace.
"They've reassured the market it's going to be a slow and gradual pace and that they expect the economy to improve moderately," said Michael Arone, the Boston-based chief investment strategist at State Street Global Advisors' U.S. intermediary business. "It was about as expected and they made their comments as wide in scope as possible and as a result there's not much you can grasp onto to say they're going to change their path."
The S&P 500 is up 3.5 per cent since the Fed's last meeting, when policy makers balked at lifting rates and signaled a slower pace for increases, citing risks from "global economic and financial developments" that could weigh on U.S. growth. Fed Chair Janet Yellen reiterated last month that the central bank will proceed cautiously.
"Looks as if we will continue with the 'slower growth, lower rates for longer' scenario," said Chris Gaffney, president of EverBank World Markets in St. Louis. "Nothing here would indicate a June hike is any more likely than before the statement. Markets are still predicting a 'hold' in interest rates until the end of 2016."
Crude production fell to 8.94 million barrels a day last week, the least since October 2014, Energy Information Administration data show. Futures fell on the initial release of the report because it showed crude inventories rose. Oil extended gains after the Federal Open Market Committee omitted previous language that "global economic and financial developments continue to pose risks," instead saying officials will "closely monitor" such developments.
"We are focused on U.S. production, which was down again," said Cavan Yie, senior equity analyst at Manulife Asset Management Ltd. in Toronto. "Production is down about 650,000 barrels from the peak, and it's going to keep dropping because nobody is spending any money to drill new wells."
Oil has rebounded since slumping to the lowest level since 2003 in February, amid signs the global surplus will ease as U.S. production declines. The World Bank boosted its forecast for oil prices this year, projecting that U.S. output cuts will steepen in the second half of 2016. Markets may rebalance by the end of the year, BP Plc Chief Executive Officer Bob Dudley said Tuesday as the company reported a surprise first-quarter profit.
West Texas Intermediate oil for June delivery increased $1.29, or 2.9 per cent, to settle at $45.33 a barrel on the New York Mercantile Exchange. It's the highest close since Nov. 4.
Brent for June settlement rose $1.44, or 3.1 per cent, to $47.18 a barrel on the London-based ICE Futures Europe exchange. It's the highest close since Nov. 10. The global benchmark ended the session at a $1.85 premium to WTI.
"The market seems to be focused on the change in Fed language about global risk," said Bob Yawger, director of the futures division at Mizuho Securities USA in New York. "They are no longer warning of possible risks, which is being taken as a positive sign."
With files from Reuters