The TSX and S&P 500 rallied to record closes Tuesday despite a muted start to the day, with both Canadian and U.S. equity markets seeing broad-based buying across sectors.
The S&P/TSX Composite Index rose 78.05 points, or 0.38%, to 20,365.85. While the real estate sector saw weakness, most other sectors gained for the day, led by a 1.41% jump in consumer staples. Energy stocks closed up 0.85% even as oil prices settled lower after a volatile day in that commodity market.
Despite the rally in equities, the action in bond markets pointed to continued concerns about the sustainability of the economic rebound. Canada’s 10-year bond yield reached its lowest levels since mid-February and U.S. Treasury yields were little changed.
Canadian government bond yields were largely playing catch up with U.S. Treasuries after the Canadian market was closed on Monday for the Civic Holiday. The 10-year touched its lowest since Feb. 18 at 1.100% before rebounding slightly to 1.134%, down 6.9 basis points on the day. Canada’s 5-year government bond, which has significant influence on the direction of fixed mortgage rates, also saw its lowest yield on Tuesday since February.
On Wall Street, 10 of the 11 S&P indexes traded higher, with energy stocks rebounding after getting hit by a dip in oil prices.
“Even though the pandemic is still with us in certain places where there are pockets of this and that, the broad shutdowns of economies are not going to happen. And I think it demonstrates that consumption patterns are super strong, which is the underlying factor that really keeps markets up,” said Jamie Cox, managing partner at Harris Financial Group in Richmond, Virginia.
Apple Inc rose 1.26% after sliding last week. Other heavyweight technology stocks, including Netflix Inc, Tesla Inc and Facebook Inc, continued to edge lower, capping gains on the tech-heavy Nasdaq.
A clutch of U.S. companies, including industrial materials maker Dupont and Discovery Inc, reported better-than-expected quarterly results, but their shares fell as investors booked profits amid lofty stock valuations.
A deepening regulatory scrutiny in China has sent jitters through the global technology sector.
Shares in U.S.- and European-listed gaming companies fell after a steep sell-off in China’s social media and video games group Tencent, driven by fears the sector could be next in regulators’ crosshairs.
“Grand Theft Auto” creator Take-Two Interactive Software Inc plunged 7.71% after it issued a disappointing sales forecast.
The Dow Jones Industrial Average rose 278.24 points, or 0.8%, to 35,116.4, the S&P 500 gained 35.99 points, or 0.82%, to 4,423.15 and the Nasdaq Composite added 80.23 points, or 0.55%, to 14,761.30.
The S&P 500′s previous record closing high was 4,422.30.
Data on Tuesday showed U.S. factory orders rose 1.5% in June after a 2.3% increase in the previous month. Economists polled by Reuters had expected a rise of 1% in June.
Later in the week, focus will shift to data on the U.S. services sector and the monthly jobs report for July.
Overall, earnings at S&P 500 firms are estimated to have climbed about 90% in the second quarter versus forecasts of 65.4% at the start of July, according to IBES data from Refinitiv.
“The earnings reports continue to come in very strong or stronger than people expect, which leads me to believe that people are underestimating the strength of recovery,” said Cox.
Volume on U.S. exchanges was 9.28 billion shares, compared with the 9.73 billion average for the full session over the last 20 trading days. Advancing issues outnumbered declining ones on the NYSE by a 1.60-to-1 ratio; on Nasdaq, a 1.05-to-1 ratio favored decliners. The S&P 500 posted 70 new 52-week highs and 3 new lows; the Nasdaq Composite recorded 91 new highs and 117 new lows.
In the oil market, concerns about rising cases of the Delta coronavirus variant outweighed expectations for another weekly draw in U.S. inventories that had boosted prices early.
Brent crude oil futures settled down 48 cents, or 0.66% at $72.41 a barrel. U.S. West Texas Intermediate (WTI) crude settled down 70 cents, or 0.98% at $70.56 a barrel.
Concerns over the spread of Delta variant in the United States and China, the top oil consumers, weighed on prices, with both benchmarks falling more than 3% at one point.
In China, the spread of the variant from the coast to inland cities has prompted authorities to impose strict measures to bring the outbreak under control.
“The news flow out of China has been bearish since the weekend,” said John Kilduff, a partner at Again Capital Management in New York. “There continues to be angst about the COVID-19 situation, which weighs on the petroleum complex the most.”
Earlier in the session, Brent and U.S. crude had risen more than 60 cents. Brent has risen more than 40% this year, helping earnings of oil firms.
“We’re trying to price in how big the slowdown is going to be with the Delta variant,” said Phil Flynn, senior analyst at Price Futures Group in Chicago.
BP, ConocoPhillips, Diamondback Energy Inc and Continental Resources Inc all reported strong second-quarter earnings this week.
Expectations of a return of Iranian crude to the markets also had a negative impact. Iran and six powers have been in talks since April to revive a nuclear pact that could release its oil exports. But Iranian and Western officials have said significant gaps remain.
Iran’s new president, Ebrahim Raisi, said on Tuesday his government would take steps to lift “tyrannical” sanctions imposed by the United States on its energy and banking sectors.
Read more: Stocks that saw action on Tuesday - and why
With files from Reuters
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