The close: TSX extends rebound as investors adjust to Fed tapering prospects

Canada’s main stock index rose for a third day on Thursday as investors moved their focus past major event risks that weighed on the market earlier in the week, with energy and financial shares leading the way.

The Toronto Stock Exchange’s S&P/TSX composite index ended up 60.44 points, or 0.3%, at 20,461.93, adding to gains on Tuesday and Wednesday. On Monday, the index hit a one-month low of 19,982.19.

“Now that we are on the path of Fed tapering, now that it is clear that Evergrande will default, the market can move on from worrying about those things,” said Joseph Abramson, co-chief investment officer at Northland Wealth Management.

It’s a case of “sell the rumor, buy the news,” Abramson added, flipping the market adage.

The Federal Reserve said on Wednesday it will likely begin reducing its monthly bond purchases as soon as November and signaled interest rate increases may follow more quickly than expected.

Shares of debt-laden property group China Evergrande jumped 18% ahead of a key debt payment deadline. Investors have worried that the group’s distress could spill into the broader economy.

The energy group rose 2.8%, helped by higher oil prices. U.S. crude oil futures settled up 1.5% at $73.30 a barrel, supported by growing fuel demand and a draw in U.S. crude inventories.

Financials, which account for about 30% of the Toronto market’s valuation, climbed 1%, while consumer discretionary stocks were up 0.7%.

Shares of business jet company Bombardier Inc rose 7.4% to notch the highest closing level since November 2019, while BlackBerry Ltd shares gained 10.1% after the cyber-security firm beat Wall Street estimates for second-quarter revenue.

Meanwhile, domestic data showed that retail sales most likely rose 2.1% in August after dipping 0.6% in July as restrictions linked to the pandemic were lifted.

U.S. stocks gained more than 1% as investors appeared relieved about the Federal Reserve’s stance on tapering stimulus and raising interest rates.

Upbeat outlooks from Accenture and Salesforce helped to bolster the market, while the U.S. Food and Drug Administration late Wednesday authorized a booster dose of the Pfizer-BioNTech COVID-19 vaccine for those 65 and older.

Also helping sentiment, concern about a ripple effect from China Evergrande continued to ease.

In a press conference after the statement, Fed Chair Jerome Powell said the bar for lifting rates from zero is much higher than for tapering.

“This is a follow-on rally from a very good Fed meeting,” said Tim Ghriskey, chief investment strategist at Inverness Counsel in New York.

“To me that showed there were no surprises and things were as expected,” he said. “Any Fed rate hike is still quite a ways off and so much can change between now and then.”

Among S&P 500 major industry sectors, energy was up 3.4% and financial stocks were up 2.5%, gaining the most ground. Real estate and utilities were the only sectors out of 11 showing losses, both off about 0.5%.

The Dow Jones Industrial Average rose 506.5 points, or 1.48%, to 34,764.82, the S&P 500 gained 53.34 points, or 1.21%, to 4,448.98 and the Nasdaq Composite added 155.40 points, or 1.04%, to 15,052.24.

Shares of IT services provider Salesforce finished up 7% and the company was a big boost to the S&P and the Dow during the session after it raised its annual earnings forecast.

Accenture gained 2.5% after the IT consulting firm boosted its first-quarter outlook.

Concerns eased further over a potential default by Chinese property developer Evergrande even as Reuters reported that some holders of the firm’s dollar bonds had given up hope of getting a coupon payment by a key Thursday deadline.

Investors shrugged off data showing sluggish business activity growth and a rise in jobless claims, in line with expectations for a slowdown in economic growth in the third quarter.

During the session the S&P 500 broke above its 50-day moving average, after trading below the indicator for three full sessions - its biggest such breach since early March.

Advancing issues outnumbered declining ones on the NYSE by a 1.91-to-1 ratio; on Nasdaq, a 2.66-to-1 ratio favored advancers.

The S&P 500 posted 26 new 52-week highs and four new lows; the Nasdaq Composite recorded 97 new highs and 47 new lows.

Volume on U.S. exchanges was 9.84 billion shares, compared with the 10.07 billion average for the last 20 trading days.

Also see: U.S., Canada bond yields surge after central banks send hawkish signals, taking traders by surprise

Reuters

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