Canada’s S&P/TSX Composite Index opened at a record high Thursday, as Wall Street stocks continued their journey to all-time peaks and as cannabis shares surged for a second day.
At 950 a.m. (ET), the benchmark index was up 102.86 points, or 0.58%, at 17,929.90.
It reached as high as 17,986.03 in the opening minutes of trade, surpassing the all-time intraday high of 17,970.51 on Feb. 20. It hit a record closing high on that same day of 17,944.06. The TSX has soared nearly 60% since bottoming out from the initial shock of the pandemic and related shutdowns in March 2020.
Investors are taking comfort this morning in Congress confirming last night the election of Joe Biden as president after a day of historic turmoil on Capital Hill.
Investors are betting Democrat control of the U.S. Congress would enable President-elect Biden to borrow and spend heavily, helping to bolster the economy - and ultimately corporate profits.
U.S. stocks rose to record heights Wednesday even as scenes of chaos played out in Washington, as investors piled into sectors of the market that could benefit from the Democratic Party’s tighter grip on legislation.
The Dow Jones Industrial Average rose 71.8 points, or 0.23%, at the open to 30901.18. The S&P 500 rose 16.6 points, or 0.44%, at the open to 3764.71, while the Nasdaq Composite rose 126.5 points, or 0.99%, to 12867.34 at the opening bell.
Aurora and Cannabis Canopy Growth were both up about 6% in early trade, as investors speculate Democrats will yield more control in pushing forward the legalizing of recreational pot use in the U.S.
Meanwhile, U.S. Treasuries extended their steepest selloff in months after Democratic Party victories in two Georgia races handed them narrow control of the Senate, bolstering Biden’s power to pass his agenda.
Europe’s Euro STOXX 600 gained 0.2%, with indexes in Frankfurt and Paris up 0.4% and 0.6% respectively. Growth-linked sectors from energy to miners rallied on the prospects of more U.S. stimulus, though UK shares turned negative.
The MSCI world equity index, which tracks shares in almost 50 countries, rose 0.2%.
A shaken Congress in the early hours of Thursday formally certified Biden’s election victory, after hundreds of President Donald Trump’s supporters had stormed the U.S. Capitol.
The shocking images of the assault on American democracy had earlier knocked sentiment, though markets focused on the implications of Democrat control of Congress.
“The market is saying the reflation trade is on,” said Justin Onuekwusi, portfolio manager at Legal & General Investment Management.
“The Democrat sweep means there will be more flexibility and speed to writing a fiscal check so a one-off U.S. fiscal boost as a bridge to a post-vaccine world is definitely on the cards.”
Wednesday’s bond sell-off pushed the yield on benchmark 10-year U.S. Treasuries, which rises when prices fall, over 1% for the first time since March. It rose as high as 1.0660% on Thursday before slipping back.
Canadian 10-year and 5-year government bond yields on Wednesday also rose, but stayed below their highest levels of December. They are ticking higher again today.
Equities
Commodities
Oil prices were steady on Thursday after hitting fresh 11-month highs on a fall in U.S. stockpiles and in the wake of a pledge by Saudi Arabia to cut output by more than expected.
Brent crude was up 5 cents to $54.35 a barrel at 1231 GMT after touching $54.90, a fresh high not seen since before the first COVID-19 lockdowns in the West. U.S. West Texas Intermediate (WTI) was up 26 cents, or 0.5% to $50.89 after touching $51.28.
Gold was steady at $1,921 an ounce, and bitcoin firm after hitting a fresh record high of $37,800.
Currencies and bonds
The Canadian dollar is modestly softer this morning, but comfortably holding above the 78 cents U.S. level. Losses in the loonie against the greenback are relatively light compared to its G10 peers and other commodity-based currencies.
“The CAD remains more or less fairly valued by our metrics at the moment,” Scotiabank forex strategists said in a note this morning. “There are no grounds to expect a significant decline in the CAD at the moment, in other words, but the broader USD trend may well exert some moderate pressure on the currency in the short run. Canada releases Trade and Ivey PMI data this morning but we expect little major impact from the data and the general tone of markets overall to define the near-term direction of spot.”
Other corporate news
Conagra Brands Inc forecast current-quarter organic sales growth of 6% to 8% on Thursday, betting on demand for frozen dinners, cake mixes and gourmet popcorns as consumers cook and snack more at home during the COVID-19 pandemic. The company, known for Slim Jim beef jerky and Birds Eye frozen vegetables, reported sales rise of 6.2% to nearly $3 billion for the second quarter ended Nov. 29.
Walgreens Boots Alliance Inc beat analysts’ estimates for adjusted quarterly profit on Thursday, driven by higher sales at its retail pharmacy stores and higher prescription volumes, sending its shares up 3.4% in premarket trading. Excluding items, the company earned $1.22 per share, while analysts were expecting a profit of $1.03 per share, according to Refinitiv IBES.
Electric-car maker Tesla Inc jumped 2.7% and was set for a record open after RBC Capital Markets upgraded its stock rating to “sector perform”.
Economic news
Canada’s trade deficit in November narrowed to C$3.34 billion in November as exports increased and imports edged down, Statistics Canada said on Thursday. Analysts polled by Reuters had predicted a deficit of C$3.50 billion after the revised C$3.73 billion deficit in October.
The U.S. trade deficit jumped to $68.1 billion in November as a surge in imports overwhelmed a smaller increase in exports. The November gap between what America buys from abroad compared to what it sells abroad rose by 8% from the October deficit of $63.1 billion, the Commerce Department said Thursday. Through the first 11 months of 2020, the deficit stands at $604.8 billion, 13.9% higher than the same period in 2019.
The number of Americans filing first-time claims for jobless benefits unexpectedly dipped last week while staying extremely high, with the labor market recovery appearing to stall as a raging COVID-19 pandemic threatens to overwhelm the country. Initial claims for state unemployment benefits totaled a seasonally adjusted 787,000 for the week ended Jan. 2, compared to 790,000 in the prior week, the Labor Department said on Thursday. Economists polled by Reuters had forecast 800,000 applications in the latest week.
(10 a.m. ET) U.S. ISM non-manufacturing PMI and Canada Ivey PMI for December.
With files from Reuters
Darcy Keith