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U.S. and Canadian stocks closed sharply higher on Friday, with shares of Apple Inc. rallying more than 4% after upbeat results, while jobs data on both sides of the border pointed to a resilient labour market.

It was the biggest gain for both the S&P 500 and the TSX since Jan. 6. A rebound in oil prices lifted energy shares, while improved outlooks from companies including Air Canada beat back concerns over a fallout from the U.S. regional bank turmoil. Analysts on Friday upgraded a number of smaller U.S. lenders they said were oversold.

The U.S. Labor Department report showed job growth accelerated in April and wage gains increased solidly, suggesting the labour market has stayed strong despite recent interest rate hikes from the Federal Reserve. Domestic data showed the Canadian economy adding 41,400 jobs in April, which was far more than expected.

“The serial pattern of too much bearishness toward Canadian and U.S. jobs continues,” said Derek Holt, vice president of capital markets economics at Scotiabank. “They keep surprising to the upside.”

On Thursday, the Canadian benchmark index posted its lowest closing level in four weeks. Even after Friday’s rally, it’s still down 0.5% for the week as oil prices swung wildly, the Federal Reserve raised interest rates, and jitters in the U.S. banking sector raised fears of tighter credit conditions.

“Investor sentiment is improving,” said Colin Cieszynski, chief market strategist at SIA Wealth Management. “Some of the waves of fear we had relative to U.S. banking and any issues around the Fed meeting have kind of washed through now and we may soon be seeing bargain hunters stepping in.”

With the jobs report, “it’s about the state of the U.S. economy, and what we saw today suggests it’s in a better position than previously expected,” added Kristina Hooper, chief global market Strategist at Invesco in New York.

Investors have been worried that the recent rate hikes may eventually push the economy into recession.

On Wednesday, the U.S. central bank raised rates by 25 basis points as expected, but Fed Chair Jerome Powell noted it was too early to say with certainty that the rate-hike cycle was over as inflation remains the chief concern.

The S&P/TSX composite index ended up 303.84 points, or 1.5%, at 20,542.03.

The Toronto market’s energy sector gained 3.4% as oil clawed back some of its recent sharp decline, settling 4.1% higher at US$71.34 a barrel.

Shares of Air Canada surged 11.6% as the airline raised its full-year forecast for core profit. Auto parts maker Magna International Inc raised its full-year sales forecast, helping to lift its shares 6.3%.

The technology sector rose 3.6%, helped by a gain of 12.1% for the shares of Open Text Corp after the company’s quarterly results beat estimates.

On Wall Street, PacWest Bancorp rallied 81.7% and Western Alliance Bancorp jumped 49.2%, while the KBW regional bank index advanced 4.7%.

Apple’s quarterly results also cheered investors worried about a potential recession. The iPhone maker’s shares hit their highest level in about nine months, and the stock ended up 4.7% in its biggest daily percentage gain since November.

The stock was the biggest positive influence on all three major U.S. stock indexes.

The Dow Jones Industrial Average rose 546.64 points, or 1.65%, to 33,674.38, the S&P 500 gained 75.03 points, or 1.85%, to 4,136.25 and the Nasdaq Composite added 269.02 points, or 2.25%, to 12,235.41.

The Cboe Volatility index registered its biggest one-day decline since March 16.

The Dow and S&P 500 still registered losses for the week, while the Nasdaq ended with a slight gain for the week.

The estimated decline in first-quarter S&P 500 earnings has been getting smaller since the start of the reporting season and is now at just 0.7% year-over-year, Refinitiv data showed on Friday.

Bond yields were sharply higher.

The yield on US 10-year notes rose 9.8 basis points (bps) to 3.450%, while the yield on two-year notes jumped 19.9 bps to 3.926%. Canadian government bond yields were higher across a flatter curve. The 2-year rose 16.1 basis points to 3.728%, while the 10-year was up 12.3 basis points at 2.923%.

The move upward in Treasury yields marks a reversal in course from their downward trend throughout the week, when investors bet that the Federal Reserve would pause and then cut rates this year.

The Canadian dollar strengthened to a two-week high against its U.S. counterpart, as investors dialed back bets for interest rate cuts by the Bank of Canada in the coming months following stronger-than-expected domestic jobs data.

The loonie was trading 1.2% higher at 1.3372 to the greenback, or 74.78 U.S. cents, its biggest gain since Jan. 4 and its strongest level since April 18. For the week, it was up 1.3%.

Money markets are still expecting an interest rate cut by the BoC this year, but chances of a cut as soon as October fell to about 30% from 70% before the data.

On Thursday, BoC Governor Tiff Macklem said that the bank is ready to tighten further if Canadian inflation gets stuck significantly above target. The bank’s benchmark rate has been on hold at a 15-year high of 4.50% since January.

Equity volume on U.S. exchanges was 10.57 billion shares, compared with the 10.70 billion average for the full session over the last 20 trading days. Advancing issues outnumbered declining ones on the NYSE by a 4.95-to-1 ratio; on Nasdaq, a 2.75-to-1 ratio favored advancers. The S&P 500 posted 13 new 52-week highs and 3 new lows; the Nasdaq Composite recorded 87 new highs and 104 new lows.

Reuters, Globe staff

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