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Canada’s main stock index rose on Wednesday to its highest level in more than two months as optimism that economic activity would recover from disruptions caused by the Omicron coronavirus variant bolstered the shares of cyclical companies. Wall Street indexes also closed sharply higher as megacap growth stocks powered up thanks to a pause in rising interest rates, and upbeat earnings reports also encouraged investors to buy.

The benchmark 10-year U.S. Treasury yield slipped from multi-year highs hit in the previous session, helping steady sentiment across global markets and boosting demand for growth stocks. But cyclical stocks also performed solidly.

The Toronto Stock Exchange’s S&P/TSX composite index ended up 227.01 points, or 1.1%, at 21,604.19, its highest closing level since Nov. 25.

“We are getting a pretty good cyclical bounce,” said Mike Archibald, a portfolio manager at AGF Investments. “A lot of that is related to incremental news that keeps coming out across North America on easing restrictions related to COVID.”

Some Canadian provinces, including the two most populous provinces of Ontario and Quebec, have started lifting their COVID-19 restrictions.

Cyclical stocks, such as industrials and consumer discretionary, tend to particularly benefit from a pickup in economic activity.

Industrials rose 2.1%, including gains for auto parts companies despite truckers blocking U.S.-Canada border crossings, while the consumer discretionary sector ended 1.7% higher.

Stocks globally, particularly those in the high-growth technology sector, have been buffeted since the start of the year by the more hawkish stance of central banks, including the Bank of Canada and the Federal Reserve.

“The technology sector, Shopify in particular, continues to be fairly volatile but seems to be trying to put in a bottom,” Archibald said.

Shares of Shopify Inc, the third most valuable company on the TSX, rose 4.9%, while the technology sector ended 2.9% higher.

Energy rallied 1.8% as data showing a drop in U.S. crude inventories bolstered oil prices. U.S. crude oil futures settled 0.3% higher at $89.66 a barrel.

Among the biggest gainers on the TSX was pot producer Canopy Growth Corp after the company reported a smaller third-quarter loss. Its shares jumped 14.8%.

In the U.S., Meta Platforms surged more than 5%, ending four sessions of deep declines that saw it lose almost a third of its value. The biggest boosts to the S&P 500 came from Nvidia , up 2.2%, and Microsoft, up 6.4%.

All 11 S&P 500 sector indexes rose, led by a 2.45% jump in real estate.

Benchmark 10-year Treasury yields retreated from 27-month highs as the U.S. Treasury Department sold new 10-year notes to strong demand, and as investors waited on highly anticipated inflation data due on Thursday.

The 10-year note yield rose to 1.970% on Tuesday, the highest since November 2019 when it hit an interim high of 1.973%. If it breaks above this level it would also likely top the key psychological level of 2% last reached in August 2019.

The yield fell on Wednesday, last at 1.945%, as the recent increase in yields drew more investor interest. That helped the Treasury auction US$37 billion of the notes to strong demand at a high yield of 1.904%, the highest since July 2019.

“The bond market basically is saying there’s a cap or a limit to how much the Fed is likely to raise rates, and that is very positive for stocks in general, and especially for growth stocks that tend to be valued higher,” said Tim Ghriskey, senior portfolio strategist at Ingalls & Snyder in New York.

Hit by worries about rising interest, the tech-heavy Nasdaq has fallen more than 7% so far this year after gaining nearly 21% in 2021. The S&P 500 is down about 4% year to date.

The Dow Jones Industrial Average rose 0.86% to end at 35,768.06 points, while the S&P 500 gained 1.45% to 4,587.18.

The Nasdaq Composite climbed 2.08% to 14,490.37.

Investors will watch consumer price data on Thursday for clues on the Federal Reserve’s plans to hike interest rates. An unexpectedly strong jobs report last week raised concerns of a more aggressive move by the central bank.

Inflation is forecast at a four-decade high of 7.3%.

The U.S. economy may be nearing a slower pace of inflation, Atlanta Fed President Raphael Bostic said on Wednesday, though he added he is still leaning toward a slightly faster pace of interest rate increases this year.

Of the 316 companies in the S&P 500 that have reported earnings to date, 78% reported above analyst expectations, according to Refinitiv data.

Chipotle Mexican Grill Inc surged 10% after beating profit and sales estimates, while KFC parent Yum Brands Inc rose 2.2% after sales beat estimates.

Enphase Energy Inc jumped 12% on upbeat results, lifting other solar stocks, with SunPower Corp and SolarEdge Technologies Inc up 6.6% and 6.9%, respectively.

CVS Health Corp slipped more than 5% after its earnings forecast for 2022 fell short of Wall Street expectations.

Advancing issues outnumbered declining ones on the NYSE by a 2.99-to-1 ratio; on Nasdaq, a 2.40-to-1 ratio favored advancers. The S&P 500 posted 40 new 52-week highs and no new lows; the Nasdaq Composite recorded 53 new highs and 56 new lows. Volume on U.S. exchanges was 10.9 billion shares, compared with a 12.3 billion average over the last 20 trading days.

Reuters, Globe staff

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