The Dow Industrials and S&P 500 closed at record highs on Monday, as earnings season kicked in to high gear in one of the heaviest reporting weeks of the quarter with bellwethers in multiple sectors poised to announce results.
The TSX also closed higher with the help of a rise in resource stocks, extending its winning streak to 14 straight sessions.
The Toronto Stock Exchange’s S&P/TSX composite index ended up 68.69 points, or 0.3%, at 21,284.84, a record closing high. The winning streak is the longest in Reuters data going back to 1979. The Canadian benchmark has soared about 22 per cent this year.
The TSX has a heavy weighting in financial and resource stocks, which do well as inflation rises and interest rates go up, noted Norman Levine, managing director at Portfolio Management Corp.
It’s the Toronto market’s “time to shine in the sun,” Levine added.
The energy group was up 1.9% as oil prices rose to multiyear highs before steadying, while the materials group, which includes precious and base metals miners and fertilizer companies, added 1.5%.
Spot gold was up 0.8% at about $1,806 per ounce as worries about inflation lifted the safe-haven asset ahead of major central bank meetings this week.
The Bank of Canada on Wednesday is expected to raise its inflation forecast and to largely end stimulus from its pandemic-era bond buying program, starting a countdown of sorts to the first interest rate hike since October 2018.
Among the biggest gainers on the TSX was Cominar REIT. Its shares rose 12.1% after an investor group led by Canadian real estate company Canderel agreed to take Cominar private in a C$2.14 billion deal.
Rogers shares ended 5.8% lower as a family feud over control of the board deepened after rival factions claimed they were in charge of one of Canada’s largest telecom companies.
Shares of Restaurant Brands International Inc, owner of Burger King and Tim Hortons, fell 4.8% after the company missed estimates for quarterly revenue.
While the Dow and S&P hit new highs, the Nasdaq outperformed on the day, buoyed by gains in Tesla and PayPal, and the tech-heavy index stands less than 1% away from its Sept. 7 closing record.
Tesla Inc jumped 12.66% to its own new high of $1,045.02 and breached $1 trillion in market capitalization, after car rental firm Hertz placed an order for 100,000 Tesla cars, while Morgan Stanley raised its price target on the stock to $1,200 from $900 per share.
“Tesla, there is a lot of the chatter out there today and Hertz placing a big order has created some excitement,” said Tim Ghriskey, chief investment strategist at Inverness Counsel in New York.
Tesla, which has risen in nine of the past ten sessions and is up more than 28% for the month, provided the biggest boost to the S&P 500 and the Nasdaq. Also helping to lift the two indexes was PayPal Inc, which gained 2.70% after the payments company scrapped plans to buy the digital pinboard site Pinterest Inc for as much as $45 billion. Shares of Pinterest slumped 12.71%.
The Dow Jones Industrial Average rose 64.13 points, or 0.18%, to 35,741.15, the S&P 500 gained 21.58 points, or 0.47%, to 4,566.48 and the Nasdaq Composite added 136.51 points, or 0.9%, to 15,226.71.
U.S. President Joe Biden on Monday held out hope for an agreement on his major spending plans before attending a climate summit in Scotland, while the White House said Democratic negotiators were closing in on a deal.
The majority of the 11 major S&P sectors advanced, with energy and consumer discretionary shares the best performing, as energy names received a boost from another rise in oil prices to multiyear highs on tight supply.
Shares of Facebook Inc were up 1.26% ahead of its quarterly results. Investor fears that like Snap Inc, the social media giant’s ad revenue could face the brunt of Apple Inc’s privacy changes appeared warranted as the social media company warned the rules would weigh on its digital business in the fourth quarter when it reported results after the closing bell. Its shares rose 2.95% in extended trade in choppy trading.
Other mega-cap names scheduled to report this week include Apple, Microsoft Corp and Google parent Alphabet Inc .
This week, 165 components of the S&P 500 are expected to post quarterly results, according to Refinitiv data. Analysts expect earnings at S&P 500 companies to grow 34.8% year-on-year for the third quarter.
Investors are also assessing how companies are navigating supply-chain bottlenecks, labor shortages and inflationary pressures to sustain growth. Of the 119 companies in the S&P 500 that have reported earnings through Monday morning, 83.2% have topped analysts’ expectations.
“We are obviously in the heart of earnings season here, and that is a lot of what is going on and earnings are coming in better than expected and there was real fear we would see some bad earnings reports because of supply-chain issues and reduced outlooks, again because of supply-chain issues. So far, so good,” said Ghriskey.
Shares of Kimberley-Clark declined 2.20% after the Huggies diaper maker cut its 2021 profit outlook due to higher input cost inflation.
Advancing issues outnumbered declining ones on the NYSE by a 1.91-to-1 ratio; on Nasdaq, a 1.76-to-1 ratio favored advancers. The S&P 500 posted 78 new 52-week highs and 2 new lows; the Nasdaq Composite recorded 161 new highs and 87 new lows. Volume on U.S. exchanges was 10.89 billion shares, compared with the 10.41 billion average for the full session over the last 20 trading days.
U.S. Treasury yields slipped on Monday in choppy trading, weighed down by market uncertainty about when the Federal Reserve would tighten monetary policy in the face of persistently high inflation.
The U.S. yield curve resumed steepening as investors continued to unwind curve flattening bets, which suggested a looming rate hike by the Fed. The spread between U.S. 5-year notes and 30-year bonds widened to 91.4 basis points on Monday, from 87.2 basis points late Friday.
Fed funds futures on Monday showed a more than 60% chance of a 25 basis-point rate tightening in June next year, fully pricing that scenario in September. Futures traders also priced in two rate hikes before the end of 2022.
“Fully pricing a rate hike in September is too aggressive for me since that would be just three months after tapering,” said Gennadiy Goldberg, senior rates strategist at TD Securities.
The Fed had said it wants to reduce asset purchases next month and end in June.
“We still look at the first rate hike well into 2023. Of course, that all depends on the economic outlook and our economic outlook is moderation in growth and inflation over the next 12 months. That doesn’t require the Fed to effectively hike rates,” Goldberg added.
Fed Chair Jerome Powell on Friday said while he thinks it is time to withdraw stimulus from the market, the Fed can be patient with raising rates and allow the labor market to heal. .
In afternoon U.S. trading, the benchmark U.S. 10-year yield fell nearly two basis points to 1.6369%. Last week, the 10-year yield hit 1.705%, the highest since mid-May.
The Canadian 10-year government bond Monday was relatively unchanged, yielding 1.66% by late afternoon.
Oil prices reached multi-year highs on Monday before steadying, as tight global supply and strengthening fuel demand in the United States and beyond supported prices.
Brent crude futures gained 46 cents to settle at $85.99 a barrel. The contract reached a session high of $86.70 a barrel, its highest level since October 2018.
U.S. West Texas Intermediate (WTI) crude futures were unchanged at $83.76 a barrel after reaching $85.41 a barrel, the highest since October 2014.
Both benchmarks have climbed by around 20% since the start of September. U.S. crude has risen for nine straight weeks, while Brent has risen for seven.
“The global energy supply crunch continues to show its teeth, as oil prices extend their upward march this week, a result of traders pricing in the ongoing rise in fuel demand – which amid limited supply response is depleting global stockpiles,” said Louise Dickson, senior oil markets analyst at Rystad Energy.
Goldman Sachs said a strong rebound in global oil demand could push Brent crude prices above its year-end forecast of $90 a barrel. The bank estimated gas-to-oil switching could contribute at least 1 million barrels per day (bpd) to oil demand.
After more than a year of depressed fuel demand, gasoline and distillate consumption is back in line with five-year averages in the United States, the world’s largest fuel consumer.
Read more: Stocks that saw action Monday - and why
Reuters, Globe staff
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