Canada’s main stock index rose on Wednesday to a record high, as Canadian National Railway led gains in industrial stocks and resource shares benefited from higher commodity prices.
The Toronto Stock Exchange’s S&P/TSX composite index ended up 101.20 points, or 0.5%, at 21,188.19, a record closing level.
“The sectors that have held back the TSX for the last few years are finally starting to work,” said Greg Taylor, a portfolio manager at Purpose Investments.
“We have got energy coming out of the doghouse, we’ve got materials working and the banks are finally starting to play some catch-up.”
The energy group rose 0.4% as oil prices rose, with U.S. crude oil futures settling 1.1% higher at $83.87 a barrel.
Copper and gold prices also rose, boosting the materials group.
The heavily weighted financials group advanced 0.6%, while industrials ended 1.6% higher, helped by a 5.2% gain for Canadian National Railway Co after the company said its chief executive will retire at the end of January and reported quarterly earnings that beat estimates.
As long as conditions supportive of cyclical stocks continue to work, “the TSX should have a good run here and might be able to outperform the S&P 500 for a while.”
Since the start of the year, the TSX has advanced 21.5%, while the S&P 500 is up 20.8%.
One risk to the outlook is rising inflation pressures, with data showing that Canada’s annual inflation rate accelerated to an 18-year high in September.
“Canadian inflation pressures continue to increase adding pressure on the Bank of Canada to potentially take additional action on reducing stimulus when it meets next week,” said Colin Cieszynski, chief market strategist, SIA Wealth Management.
On Wall Street, solid earnings from health care companies helped send stocks higher and pushed the benchmark S&P 500 to the brink of another record high.
The market has been gaining ground as investors shift their focus to the latest round of corporate earnings. Stocks have been choppy for weeks as rising inflation and lackluster economic data raised concerns about the path ahead for the economic recovery.
The S&P 500 rose 16.56 points, or 0.4%, to 4,536.19. It’s the sixth straight gain for the benchmark index and puts it less than a point from the all-time high it set on Sept. 2.
The Dow Jones Industrial Average rose 152.03 points, or 0.4%, to 35,609.34. The Nasdaq fell 7.41 points, or less than 0.1%, to 15,121.68.
“The reason we’re seeing this rally over the last week is that company earnings are looking really good,” said Sylvia Jablonski, chief investment officer at Defiance ETFs. “Most companies are managing inflationary pressures and pricing issues and that’s helping to alleviate concerns about overvaluation and inflation.”
Wall Street cheered solid earnings from a variety of health care companies. Abbott Laboratories, which makes infant formula, medical devices and drugs, rose 3.3% after handily beating analysts’ third-quarter profit forecasts. Health insurer Anthem rose 7.7% after also reporting strong financial results. Technology stocks lagged the broader market.
Bond yields rose. The yield on the 10-year Treasury rose to 1.65% from 1.63% late Tuesday.
Netflix fell 2.2% after forecasting earnings for its current quarter that were below analysts’ estimates.
PayPal fell 4.9% following reports that it is considering buying digital pinboard and shopping tool Pinterest, which jumped 12.8%.
The price of Bitcoin rose above $66,000 for the first time. The gains came a day after the first exchange-traded fund linked to Bitcoin futures attracted huge interest from investors looking to get into the surging field of cryptocurrencies.
Investors are busy reviewing the latest report cards from companies as they try to get a clearer understanding of how rising inflation and the lingering threat from COVID-19 will affect the economy.
A key concern remains supply chain disruptions and rising materials costs cutting into profits for many companies. Higher costs for companies could mean higher prices for consumers, which could threaten spending that is supporting the recovery.
Oilfield services company Baker Hughes fell 5.7% after reporting weak third-quarter financial results, partly because of supply chain problems and higher costs. Brinker International, which operates Chili’s Grill & Bar, fell 9.7% after its fiscal first-quarter profit fell far short of analysts’ forecasts as it faces higher commodity and labor costs.
Investors seem to be taking the impact from rising inflation on companies in stride, said Greg Bassuk, CEO at AXS Investments.
“Without big surprises on the downside, or something really outsized, the bulls are overtaking the bears,” he said.
Rising inflation has also put a sharper focus on the Federal Reserve and its plans to start trimming bond purchases that have helped keep interest rates low. The central bank maintained through most of the year that inflation would likely be temporary and tied to the economic recovery, but it has grown more concerned about rising inflation persisting.
Railroad operator CSX gained ground in after-hours trading after reporting solid financial results, while Tesla slipped after reporting its results.
There are still several large companies on deck to release their earnings this week. American Airlines, Southwest Airlines and Union Pacific will report on Thursday.
Reuters, The Associated Press, Globe staff
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