Canada’s benchmark stock index closed at its third straight record high on Thursday, thanks largely to further gains in the energy sector as well as in financials, which saw three major banks report better-than-expected earnings.
The S&P/TSX Composite Index rose 28.94 points, or 0.15%, at 19,774.41. The energy sector rose just shy of 1%, with financials advancing 0.41%.
Royal Bank of Canada, Toronto-Dominion Bank and Canadian Imperial Bank of Commerce all beat consensus analyst expectations in reporting adjusted quarterly profit in their latest quarters. Signs of an economic recovery helped them reverse bad debt provisions and their capital markets and wealth management units boomed.
But their results masked some challenges, including flat net interest margins, little to no commercial loan growth and the impact of a strong Canadian dollar.
Particularly at TD, earnings excluding the impact of provisions and taxes fell 16.8%, compared with increases of 14% and 11% at CIBC and RBC, respectively.
The impact of the strong Canadian dollar and higher payments to retail partners in its U.S. credit card business weighed on earnings, TD Chief Financial Officer Riaz Ahmed said in an interview with Reuters.
RBC and CIBC traded at all-time highs on Thursday, closing up 1.25% and 2.89%, respectively. But TD closed down 2.50%.
“At first look we see TD’s Q2 EPS beat as lower quality relative to the bank’s peers,” Credit Suisse analyst Mike Rizvanovic wrote in a note.
In contrast, RBC had a “solid quarter overall” and CIBC had “strength across each operating segment” although the latter’s margin compression in domestic lending was a modest concern, he said.
While RBC, Canada’s biggest bank, also felt some currency hit in translating earnings from its U.S. City National business, it was offset to some degree by the impact on expenses, executives said on an analyst call.
The TSX materials sector suffered losses Thursday, losing nearly half a percentage point, amid weakness in precious metals stocks. Barrick Gold tumbled 5.17%. But copper producers within the sector rallied, as did uranium stocks. Western Copper and Gold rallied nearly 18% and Denison Mines 11.25%.
Meanwhile, U.S. stocks advanced slightly, as data showing improvement in the labor market helped bolster expectations in the economic recovery and spurred a minor rotation towards stocks seen as more likely to benefit from the rebound.
The number of Americans filing new unemployment claims dropped more than expected last week to a 14-month low of 406,000 as pandemic restrictions continue to be lifted, while a separate report showed business spending on equipment picked up speed.
The data helped lift U.S. Treasury yields, with the benchmark 10-year note reaching a high of 1.625% and denting the attractiveness of higher-growth names in areas such as technology while helping those seen as more likely to benefit from an improving economy such as financials and small caps.
Still, the 10-year yield remained within the range it has been in for several days, which served to keep inflation concerns in check and limited the rotation within sectors.
Investors have been closely watching economic data and comments from Federal Reserve officials for signs of runaway inflation and the possibility the central bank may begin to pull back on its massive stimulus measures.
“When you look at the jobless claims that actually shows we’re continuing to make progress, if we get a strong jobs report in the next release that’s going to provide some support, until then there’s uncertainty so I don’t think there’s a lot of momentum either way,” said Brad McMillan, chief investment officer for Commonwealth Financial Network, in Waltham, Mass.
“We’ve had the Fed come out and say we’re going to continue to support things but now we’re starting to be a little bit nervous, that’s obviously a headwind.”
The Dow Jones Industrial Average rose 141.59 points, or 0.41%, to 34,464.64, the S&P 500 gained 4.89 points, or 0.12%, to 4,200.88 and the Nasdaq Composite dropped 1.72 points, or 0.01%, to 13,736.28.
Weighed down by weakness in tech shares, the Nasdaq underperformed the Dow and S&P.
U.S. planemaker Boeing climbed 3.87% to lead the Dow higher after its European rival Airbus outlined an almost two-fold increase in production, citing a strong recovery in aviation from the COVID-19 pandemic.
Boeing supplier General Electric jumped 7.09% and the two were the biggest boost to the S&P industrials, the best performing sector on the day.
Investors will now look to the U.S. personal consumption expenditure report due on Friday as it is the central bank’s preferred inflation measure for its 2% long-term target.
Fed officials have repeatedly maintained in recent days that the central bank is not ready to adjust its monetary support, although some have suggested they are open to begin discussing the reduction of its bond-buying plan. On Thursday, Federal Reserve Bank of Dallas President Robert Kaplan said the labour market is tighter than many realize.
Nvidia Corp forecast second-quarter revenue above analysts’ estimates, but shares fell 1.35% as the chipmaker could not say for certain how much of its recent revenue rise was driven by the volatile cryptocurrency-mining market.
Volume on U.S. exchanges was 12.48 billion shares, compared with the 10.52 billion average for the full session over the last 20 trading days. Advancing issues outnumbered declining ones on the NYSE by a 1.85-to-1 ratio; on Nasdaq, a 1.95-to-1 ratio favored advancers. The S&P 500 posted 32 new 52-week highs and one new low; the Nasdaq Composite recorded 121 new highs and 22 new lows.
Oil prices rose 1%, bolstered by te strong U.S. economic data that offset investors’ concerns about the potential for a rise in Iranian supplies.
Brent rose 59 cents, 0.9%, to settle at $69.46 a barrel. U.S. West Texas Intermediate (WTI) crude rose 64 cents, or 1%, to settle at $66.85 a barrel.
U.S. gold futures settled down 0.3% at $1,898.5.
With files from Reuters
Be smart with your money. Get the latest investing insights delivered right to your inbox three times a week, with the Globe Investor newsletter. Sign up today.