Canadian stocks climbed a fourth dayon Friday, trimming a monthly drop that sent shares into a bear market earlier this year, as crude prices rose and data showed the resource-rich nation's economy expanded for the first time in three months.
The Standard & Poor's/TSX Composite Index rose 1.77 per cent, or 223.4 points, to 12,815.37 in Toronto. The index has rallied 8.2 per cent since hitting a two-and-a-half-year low on Jan. 20. While the benchmark equity gauge finished with its first negative January since 2010, falling almost 1.9 per cent, the late rally among energy producers has boosted the S&P/TSX's performance to the second- best among developed markets this year, behind only New Zealand.
"It's a dash for trash," said John Stephenson, chief executive officer of Stephenson & Co. Capital Management in Toronto. His firm manages about $50-million. "We've had a few days in a row of rising oil prices and it's disproportionately benefiting Canada. Energy rallies a bit and people buy the energy names, especially the most beat up."
Health-care and raw material companies posted the biggest gains out of 10 groups in the S&P/TSX. Valeant Pharmaceuticals International Inc. jumped 6 per cent after a two-day rout of 13 per cent. Yamana Gold Inc. climbed 7.1 per cent and Goldcorp Inc. rose 2.6 per cent as the price of gold advanced.
Energy shares fluctuated, finishing up 0.8 per cent. Oil futures reversed after Russian Energy Minister Alexander Novak said that while OPEC member Venezuela has proposed a meeting next month, nothing is scheduled. Oil prices spiked after Novak on Thursday said the Organization of Petroleum Exporting Countries and other producers may meet to discuss output.
The broader S&P/TSX remains in the red for January, weighed down by losses among health-care and consumer discretionary stocks. Bombardier Inc., Concordia Healthcare Corp. and auto- parts manufacturer Linamar Corp. have been among the worst performers so far in 2016.
The S&P/TSX joined a global rally Friday after the Bank of Japan surprised investors by adopting a negative interest-rate strategy. The MSCI All-Country World Index gained 1.6 per cent, trimming this month's slide to 6.5 percent. The Stoxx Europe 600 Index rose 2.2 per cent, while Japan's Topix Index closed 2.9 per cent higher.
The Shanghai Composite Index jumped 3.1 per cent, its first advance in four days. That trimmed January's decline to 23 per cent, the biggest monthly drop since October 2008 and the worst performance among 93 equity indexes tracked by Bloomberg worldwide.
"Green arrows abound on this last trading day of the month in what has otherwise been a horrible start to the year," David Rosenberg, chief economist and strategist at Gluskin Sheff & Associates Inc. in Toronto, wrote in a note.
A rebound in manufacturing and wholesaling helped Canada's gross domestic product expand by 0.3 per cent in November, matching economists' forecasts and indicating the nation is shaking off the damage from a drop in commodity prices.
The S&P/TSX has performed better relative to other benchmarks after having "taken it on the chin" in 2015, when it was one of the worst performers in the developed world, Mr. Stephenson said.
"There is a huge amount of pent-up enthusiasm for energy and investors are excited to see a rally," he said.
The commodity-sensitive Canadian dollar also continued to trend higher on the strength in oil, up 0.29 of a U.S. cent at 71.38 cents US after having rebounded from below 69 cents early last week.
The U.S. stocks ended the worst January since 2009 with the best one-day gains in more than four months, after earnings from Microsoft Corp. exceeded expectations and the Bank of Japan stepped up monetary stimulus.
Equity gains accelerated in the final hour, with the strong finish a fitting end to a weak month that featured sharp reversals on an almost daily basis. Microsoft led the surge Friday with its biggest gain in three months. Nine of the S&P 500's 10 main groups rose at least 1.6 per cent. Amazon.com Inc. was a blemish, tumbling 7.6 per cent as earnings for the holiday quarter missed estimates.
The Standard & Poor's 500 S&P 500 rose 2.5 per cent to 1,939.72 in New York. The gauge slumped 5.1 per cent in January, its worst start to a year since the height of the financial crisis.
The Dow Jones industrial average rose 390.08 points, or 2.43 per cent, to 16,459.72, while the Nasdaq Composite added 107.28 points, or 2.38 per cent, to 4,613.95.
"Part of the strength in the markets today is central banks in the developed world being accommodative, and the other is a surprisingly strong Chicago manufacturing number that was really a blowout," said Phil Orlando, who helps oversee $360-billion as chief equity-market strategist at Federated Investors Inc. in New York. "Earnings have been better than expected so far."
Stocks swung between gains and losses this week as investors assessed corporate earnings and the degree to which central banks will intervene to help stem increasing volatility and a dimming outlook for global growth.
Prior to Friday's unexpected action from the Bank of Japan to adopt a negative interest-rate strategy, the European Central Bank signaled last week it could boost stimulus as soon as March. The Federal Reserve said Wednesday it was watching to see how the global economy and markets impact the U.S. outlook.
Data Friday showed the economy expanded at a slower pace in the fourth quarter, in line with forecasts, as households tempered spending while businesses cut back on capital investment and made further adjustments to inventories. A separate report showed consumer confidence cooled in January, shaken by the stock-market downturn, while a gauge on Chicago- area manufacturing jumped more than forecast to the highest in a year.
"With today's GDP there's modest economic growth and Japan overnight pursuing lower interest rates means the Fed is not likely to raise four times this year," said Michael Arone, the Boston-based chief investment strategist at State Street Global Advisors' U.S. Intermediary Business. "Events like what happened with Japan going to negative interest rates puts downward pressure on our own interest rates and impacts the Fed's ability to raise rates."
Investors are also scouring earnings for indications on how well U.S. companies are weathering weakness emanating from China. Analysts estimate profits at index members fell 5.6 percent in the fourth quarter, better than predictions two weeks ago that called for a 7-per-cent slump. Of those that have already posted results, 80 per cent beat earnings projections, while 48 per cent have exceeded sales estimates.
Oil recorded a second weekly gain amid speculation that OPEC and Russia will meet to discuss trimming crude production to bolster prices.
Russian Energy Minister Alexander Novak said that while OPEC member Venezuela proposed a meeting next month, nothing is scheduled. Russia, after months of insisting it was happy to keep pumping at full throttle, suggested in recent comments it is open to compromise with the Organization of Petroleum Exporting Countries. Equities climbed as the Bank of Japan's unexpected monetary stimulus boosted confidence that central banks remain vigilant of slowing economic growth.
"People are holding out some hope that an agreement will be reached to curb production," said John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy. "There's also a feeling that the central banks will be increasing stimulus to help the economy."
Oil has pared its decline this year to about 9 per cent after plunging to a 12-year low. Global markets remain volatile because of concerns about brimming U.S. stockpiles and rising exports from Iran following the removal of sanctions against the country. OPEC's January crude output climbed to the highest level in data compiled by Bloomberg going back 20 years as Indonesia's membership was reactivated.
West Texas Intermediate for March delivery rose 40 cents to settle at $33.62 a barrel on the New York Mercantile Exchange. The contract climbed as much as 3.6 per cent to $34.40 earlier. Total volume traded was 46 per cent above the 100-day average.
Brent for March settlement, which expires Friday, rose 82 cents, or 2.4 per cent, to $34.71 a barrel on the London-based ICE Futures Europe exchange.
With a file from The Canadian Press and Reuters