U.S. stocks ended higher on Tuesday, led by a sharp gain in the Nasdaq, as technology and shares of other big growth names rebounded from recent losses and Nike rose after it reported upbeat results.
The TSX, meanwhile, rose to another record high, as tech shares also rallied, including a 6% rise in shares of heavyweight Shopify. It was the sixth day in a row that the Canadian benchmark closed higher.
Financial shares also advanced in both the U.S. and Canada, as government bond yields continued their ascent to multi-year highs.
The Federal Reserve last week raised the federal funds rate by a quarter of a percentage point from the near-zero level, and Fed officials are doing little to downplay rising market expectations the U.S. central bank will raise rates by half a percentage point in May to tame inflation.
While higher borrowing costs are a negative for consumers and many businesses, they help to boost the profit outlook for banks.
The S&P/TSX composite index ended up 65.22 points, or 0.3%, at 22,074.35. The six-day winning streak for the index was the longest since last October.
“It’s a little bit of a pivot in terms of what is leading the market,” said Philip Petursson, chief investment strategist at IG Wealth Management. “It’s not energy. It’s a rebound in technology - in particular Shopify - as the bargain hunters have started to come out and pick away at some of the tech names.”
The technology group, which has been under pressure in recent months, climbed 2.8%.
Financials, which account for more than 30% of the Toronto market’s weighting, were up 0.6% as the bond market moved to price in more aggressive interest rate hikes by the Federal Reserve and the Bank of Canada. Higher rates tend to boost the margins that banks earn on their loans.
Adding to the upbeat tone, Canadian Pacific Railway Ltd will resume operations on Tuesday as it agreed to settle a labor dispute with the union representing its conductors and engineers through arbitration.
“This is something that needed to happen not only for the company itself but for the broader Canadian economy,” Petursson said.
“You can’t have the railroad shut down with inflationary pressures the way they are for an extended period of time.”
Air Canada rose 3.5% after saying it would add 26 extra-long-range versions of the Airbus A321neo aircraft to its fleet.
TSX resource shares gave back some recent gains, with the energy group falling 0.8% and materials down 1.3%.
On Wall Street, every S&P 500 sector but energy ended higher on the day. The three major indexes have gained in five of the last six sessions.
Apple Inc, Microsoft Corp, Amazon.com Inc , Alphabet Inc and Tesla Inc gave the biggest boosts to the S&P 500 and the Nasdaq. The S&P 500 technology index rose 1.4% on the day, but remained down 10% for the quarter so far, among the sharpest declines of the major sectors.
With the recent lows, “you sort of really did wash out the sellers,” said Jim Paulsen, chief investment strategist at the Leuthold Group in Minneapolis. “Now you’re seeing even the old leadership bounce a little bit, giving people a little support that maybe the worst is over.
“Underneath all of it is that economic and earnings data have remained fairly good.”
Nike Inc shares rose 2.2% after the company beat quarterly profit and revenue expectations and said manufacturing issues pinching sales over the past six months were in the rear view mirror.
The Dow Jones Industrial Average rose 254.47 points, or 0.74%, to 34,807.46, the S&P 500 gained 50.43 points, or 1.13%, to 4,511.61 and the Nasdaq Composite added 270.36 points, or 1.95%, to 14,108.82.
Tesla Inc jumped 7.9% as the electric-car maker delivered its first German-made cars to customers at its Gruenheide gigafactory.
On Monday, Fed Chair Jerome Powell said the central bank must move “expeditiously” to raise rates. When asked what would prevent the central bank from raising rates by half a percentage point at the May 3-4 policy meeting, he responded: “Nothing.” Powell is slated to speak again on Wednesday.
Investors were still keeping a close eye on the Ukraine-Russia conflict, with Ukrainian officials saying the besieged port city of Mariupol is under continuous bombardment as Russian forces redouble their efforts to capture it.
Advancing issues outnumbered declining ones on the NYSE by a 1.71-to-1 ratio; on Nasdaq, a 2.53-to-1 ratio favored advancers. The S&P 500 posted 36 new 52-week highs and no new lows; the Nasdaq Composite recorded 60 new highs and 37 new lows. Volume on U.S. exchanges was 12.14 billion shares, compared with the 14.5 billion average for the full session over the last 20 trading days.
The yield on 10-year U.S. Treasury notes jumped 6.9 basis points to 2.386%. The Canadian 10-year bond rose about 10 basis points to as high as 2.421% - the highest since 2018. The Canadian 5-year bond, which influences fixed mortgage rates, rose to a multiyear high of 2.28%.
The market is pricing in a 72.2% probability that the Fed will hike the fed fund rates 50 basis points in May, with only 27.8% expecting a quarter percentage-point hike. Odds for a bigger hike jumped from just over 50% on Monday.
Goldman Sachs expects the Fed will raise rates by 50 basis points at both its May and June meetings, following Powell’s hawkish remarks.
Still, some strategists suggest markets are being overly aggressive in pricing in central bank rate hikes to come.
Reuters, Globe staff
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