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The S&P 500 ended higher on Thursday, with Pfizer and Tesla fueling a late-session rally while investors eyed the war in Ukraine and a potentially more aggressive Federal Reserve.

Tesla Inc rose 1.2% and Microsoft Corp added 0.6%, helping lift the S&P 500 and provide the Nasdaq a modest gain. Also supporting the S&P 500, Pfizer Inc jumped 4.3%after it said it would buy privately held ReViral Ltd in a deal worth as much as $525 million, its second acquisition in less than six months to boost its drug portfolio.

The S&P traded at a loss for much of the day before rallying near the end of the session. The TSX also closed higher after trading weaker for much of the session, bolstered by a rally in energy and materials stocks

“We don’t know how Ukraine is going resolve itself. We don’t know how this hawkish Fed is going to impact the economy. We don’t know if they can navigate a soft landing. What it equals is a whipsaw market,” said Dennis Dick, a trader at Bright Trading LLC. “If you’re following trends, then you’re lost in this market because all this market is is chop.”

The S&P/TSX composite index closed up 46.29 points to 21,834.89. The day started poorly with the Toronto market losing as much as about 150 points.

Michael Currie, vice-president and investment adviser at TD Wealth, says Thursday’s movements are hard to explain except they represent a rebound after two or three “lousy days in a row.”

“Bad start to the month and I guess when things opened down this morning, enough people saw it was maybe down enough and here’s a chance to get in,” he said in an interview.

The rally was pretty broadly based, led by energy and materials, which climbed 1.9 and 1.8 per cent, respectively.

Energy increased despite crude oil prices dipping slightly on the day. Shares of Advantage Oil and Gas Ltd. were up 5.3 per cent while Baytex Energy Corp. moved 3.6 per cent higher.

The May crude contract was down 20 cents at US$96.03 per barrel and the May natural gas contract was up 33 cents at US$6.36 per mmBTU.

The Canadian dollar traded for 79.47 cents US compared with 79.94 cents US on Wednesday.

Materials moved higher on a rise in gold prices with Ero Copper Corp. up 7.3 per cent and OceanaGold Corp. 3.9 per cent higher.

“This is its first gain in three sessions (so) probably just a little bargain-hunting there for people,” Currie said.

He noted that the Fed becoming more hawkish is negative for gold, while bad news coming out of Ukraine is good for the precious metal.

“So there’s kind of a bit of a tug of war there, but the little bounce up in gold has helped materials.”

Health care was the biggest laggard in Toronto, losing 3.7 per cent as cannabis producer Tilray Inc. slumped 10.6 per cent. The heavyweight financials sector was down 1.2 per cent as all Canadian banks were lower with Toronto-Dominion leading with a drop of 2.7 per cent.

Technology continued its losing ways, with Lightspeed Commerce Inc. decreasing 3.7 per cent and Shopify Inc. down 1.4 per cent.

Currie said he doesn’t believe the federal budget, which was released after markets closed, had much of an impact on trading since the general themes of the government’s fiscal plans were already known.

“It seems like they telegraphed a lot of what’s going to happen. Seems to be a focus on housing, so unless there’s a surprise in there, I think it’s probably cooked into the market a little bit here already.”

Mega-cap growth stocks in the U.S. came under pressure earlier this week after comments from Fed policymakers and minutes from the central bank’s March meeting suggested a rapid removal of stimulus measures put in place during the pandemic.

St. Louis Federal Reserve President James Bullard said the U.S. central bank’s short-term policy rate should reach 3.5% later this year.

Minutes released on Wednesday showed that Fed officials “generally agreed” to cut up to $95 billion a month from the central bank’s asset holdings even as the war in Ukraine tempered the first U.S. interest rate increase since 2018.

“The realization for investors continues that the Fed is still not at max hawkishness and we’re going to err on the side of them wanting to do more to continue to control inflation,” said Anastasia Amoroso, chief investment strategist at iCapital Network, an investment marketplace firm.

Traders now see 88.9% likelihood of a 50 basis-point rate hike at the central bank’s meeting next month.

U.S. companies will start reporting first-quarter results in the coming weeks, with banks set to kick off the season in earnest next week. Analysts on average expect S&P 500 companies’ earnings to have grown 6.4% in the March quarter, according to I/B/E/S data from Refinitiv. That compares with over 30% growth in the prior quarter.

“As we get into the heart of earnings season, I expect volatility to be very prominent,” said Jake Dollarhide, chief executive officer of Longbow Asset Management in Tulsa, Oklahoma. “We could see strong results that beat the highest expectations, but weak expectations for the next 12 months.”

Among the 11 S&P 500 sector indexes, real estate was among the deepest decliners, while the health sector index was among the top gainers.

Adding to cautious sentiment, Russian Foreign Minister Sergei Lavrov said Ukraine had presented Moscow with a draft peace deal that contained “unacceptable” elements, while the U.S. Senate voted to remove “most favored nation” trade status for Russia in one bill and ban oil imports in another.

The Dow Jones Industrial Average rose 0.25% to end at 34,583.57 points, while the S&P 500 gained 0.43% to 4,500.21. The Nasdaq Composite climbed 0.06% to 13,897.30.

With investors worried about the effect of rising interest rates, growth stocks with pricey valuations have underperformed value stocks so far in 2022.

In economic news, data showed the number of Americans filing new claims for unemployment benefits fell last week, indicating a further tightening of labor market conditions heading into the second quarter that could contribute to keeping inflation elevated.

Among other movers, HP Inc jumped 14.8% after Warren Buffett’s Berkshire Hathaway Inc disclosed it purchased nearly 121 million shares of the personal computing and printing company.

Costco Wholesale Corp rallied 4% after the retailer late on Wednesday reported a surge in March sales.

American Airlines Group Inc, Delta Air Lines Inc , Southwest Airlines Co and United Airlines Holdings Inc fell between 1.6% and 3.1% after Barclays warned of a recent jump in oil prices hurting first-quarter earnings.

Declining issues outnumbered advancing ones on the NYSE by a 1.11-to-1 ratio; on Nasdaq, a 1.45-to-1 ratio favored decliners. The S&P 500 posted 32 new 52-week highs and 26 new lows; the Nasdaq Composite recorded 45 new highs and 219 new lows. About 11.5 billion shares changed hands in U.S. exchanges, compared with the 13.0 billion daily average over the last 20 sessions.

The U.S. Treasury 10-year yield touched a three-year high on Thursday and the 2 year-10 year spread widened as traders, having priced in a string of rate hikes from the U.S. central bank, have sharpened their focus on the pace and scope of the Fed’s plans to reduce its balance sheet.

The Fed’s 25 basis point rate hike last month, and market expectations for more, mostly affect the short end of the curve, while the focus on the balance sheet runoff pressures yields higher on the long end.

“This is more of the same from yesterday, the steepening of the curve, given the fact that the market is still digesting the details of the balance sheet runoff and we received quite a meaningful steepening of the curve on the back of what is considered hawkish comments from (Fed Governor Lael) Brainard, and confirmation from the minutes, that the Fed is going to be instituting an aggressive pace of balance sheet runoff,” said Subadra Rajappa, head of U.S. rates strategy at Societe Generale in New York.

However, Rajappa added, “the risk is that the curve is going to continue to invert given the fact that the expectations are the Fed’s going to be quite aggressive on inflation.”

Brainard said on Tuesday she expects rapid reductions to the Fed’s balance sheet and that the process could start in early May. Yields on the 2-, 5- and 10-year Treasuries have since hit multi-year highs, and the 2-10 yield curve went positive after having inverted late last week.

Yield curve inversions often signal a recession is just around the corner, but not always, and its accuracy can depend how long the inversion persists.

The yield on 10-year Treasury notes was up 3.8 basis points to 2.647% while the 2-year note yield was down 4.5 basis points at 2.457%, leaving the 2-10 spread at 18.72 basis points.

The near 27 basis point widening of that spread so far this week is the most for any week back to June 2013, and follows last week’s 27.5 basis point tightening that inverted the curve, the sharpest weekly tightening since September 2011.

The unwinding of the recent sharp move that triggered the inversion was expected by some.

“It’s really not surprising that it flattened as much as it did, but also that we’re seeing some profit taking,” said Tom di Galoma, managing director at Seaport Global Holdings in New York.

He said bonds will start to attract more institutional money and draw cash away from stocks when the 10-year yield climbs above 2.75%.

Reuters, The Canadian Press, Globe staff

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