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Wall Street’s three major indexes and the TSX rallied to close over 2% on Monday as U.S. Treasury yields tumbled amid weaker-than-expected American manufacturing data, increasing the appeal of stocks at the start of the year’s final quarter.

It was the Canadian benchmark stock index’s biggest percentage gain since April 29, 2020. The loonie also saw its biggest gain against the greenback in more than two years, as Canadian government bond yields held relatively stable, encouraging money flows towards the domestic currency. The Canadian markets also benefited from a nearly US$4 a barrel jump in the price of crude oil, as OPEC+ considered reducing output by more than 1 million barrels per day to buttress prices with what would be its biggest cut since the start of the COVID-19 pandemic.

U.S. Treasury yields turned lower after British officials abandoned a tax cut plan, and new data indicated a slowdown in U.S. manufacturing. The yield on 10-year Treasury notes fell 16 basis points to 3.639%. The yield hit a 14-year high of 4.109% last week before tumbling after the Bank of England announced plans to buy government debt.

By contrast, the 10-year Canadian government bond yield Monday fell only about 2 basis points for the session.

The Toronto Stock Exchange’s S&P/TSX composite index ended up 436.97 points, or 2.4%, at 18,881.19, allowing it to recoup some recent declines. It fell 4.6% in September.

“Investors are starting to doubt central banks globally will remain aggressive with fighting inflation as financial stability risks are growing,” Edward Moya, senior market analyst at OANDA, said in a note.

Boosting the Toronto market, the energy sector climbed 5.8% as crude prices settled 5.2% higher. The materials sector, which includes precious and base metals miners and fertilizer companies, added 2.1% as gold and copper prices rose.

The heavily-weighted financial sector gained 1.4%, while industrials ended 2.7% higher.

Among stocks that lost ground in Toronto was Saputo Inc. It fell 3.1% after Scotiabank cut the shares of the dairy firm to sector perform from sector outperform.

The U.S. stock market has suffered three quarterly declines in a row in a tumultuous year marked by interest rate hikes to tame historically high inflation, and concerns about a slowing economy. Some traders believed markets had become oversold.

On Monday, all 11 major S&P 500 sectors advanced to positive territory, with energy being the biggest gainer.

Megacap growth and technology companies such as Apple Inc and Microsoft Corp rose over 3% respectively, while banks advanced 3%.

Data showed manufacturing activity increased at its slowest pace in nearly 2-1/2 years in September as new orders contracted, likely as rising interest rates to tame inflation cooled demand for goods.

The Institute for Supply Management said its manufacturing PMI dropped to 50.9 this month, missing estimates but still above 50, indicating growth.

“The economic data stream actually came in worse than expected. In a very counterintuitive fashion that likely represents good news for equity markets,” said Art Hogan, chief market strategist at B. Riley Wealth in Boston. “(While) good economic data, strong readings had been a catalyst for selling, this is the first time we’ve actually seen some negative news be a catalyst.”

The Dow Jones Industrial Average rose 765.38 points, or 2.66%, to 29,490.89; the S&P 500 gained 92.81 points, or 2.59%, at 3,678.43; and the Nasdaq Composite added 239.82 points, or 2.27%, at 10,815.44.

Tesla Inc fell 8.6% after it sold fewer-than-expected vehicles in the third quarter as deliveries lagged way behind production due to logistic hurdles. Peers Lucid Group gained 0.9% and Rivian Automotive fell 3.1%.

Major automakers are expected to report modest declines in U.S. new vehicle sales, but analysts and investors worry that a darkening economic picture, not inventory shortages, will lead to weaker car sales.

Citigroup and Credit Suisse became the latest brokerages to lower 2022 year-end targets for the S&P 500, as U.S. equity markets bear the heat of aggressive central bank actions to tamp down inflation.

Credit Suisse also set a 2023 year-end price target for the benchmark index at 4,050 points, adding that 2023 would be a “year of weak, non-recessionary growth and falling inflation.”

Advancing issues outnumbered decliners on the NYSE by a 5.04-to-1 ratio; on Nasdaq, a 2.70-to-1 ratio favored advancers. The S&P 500 posted one new 52-week high and 23 new lows; the Nasdaq Composite recorded 58 new highs and 282 new lows.

Reuters, Globe staff

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