Canada’s main stock market index climbed above the 20,000 threshold for the first time on Tuesday while the loonie notched a six-year high, with sentiment underpinned by gains in oil and data showing strong economic growth in the first quarter.
The Toronto Stock Exchange’s S&P/TSX composite index touched a record high at 20,014.70 before dipping to 19,976.01 at the close, up 1.24%, or 245.02 points, on the day. Since hitting its low during the coronavirus crisis in March last year, the commodity-linked index has soared nearly 80%.
Twenty thousand is “a great big psychological level,” said Colin Cieszynski, chief market strategist at SIA Wealth Management. “It’s confirmation that we have a pretty solid upward trend in place.”
The TSX climbed in May for the fourth month, while it is up nearly 15% since the beginning of 2021, outpacing Wall Street.
Materials and energy shares account for 25% of the Toronto market’s capitalization, compared with 5% for the S&P 500.
Oil prices settled higher on Tuesday, with Brent hitting above $71 and trading at its highest since March, on expectations for growing fuel demand during the summer driving season in the United States as OPEC+ agreed to boost output.
Brent crude futures for August settled up 93 cents, or 1.3%, to $70.25 a barrel after hitting $71 earlier in the session - its highest intra-day price since March 8.
U.S. West Texas Intermediate crude for July was up $1.40, or 2.1%, to $67.72.
Canada’s first-quarter annualized growth was 5.6%, reflecting continued strength in the economy influenced by favorable mortgage rates, government transfers and stronger employment, the latest official data showed.
The Canadian dollar, which has benefited this year from higher commodity prices and a more hawkish stance from the Bank of Canada, touched its strongest since May 2015 at 1.2007 per U.S. dollar, or 83.28 U.S. cents, before slipping to 1.2057, up 0.1% on the day.
The Toronto stock market is expected to rise to 20,050 by the end of the year and then to 21,750 by the end of 2022, a Reuters polls showed last month.
Wall Street’s main indexes ended little changed on Tuesday, with gains in energy and financial shares countering declines in healthcare, as investors weighed the latest U.S. economic data for signs of a rebound and rising inflation.
The S&P 500 financial sector hit a record high, while expected growth in fuel demand boosted oil prices and helped lift the energy sector. The healthcare sector was dragged down by a weak profit forecast from Abbott Laboratories.
Data showed U.S. manufacturing activity picked up in May as pent-up demand in a reopening economy boosted orders. But unfinished work piled up because of shortages of raw materials and labor.
“People came back from a holiday weekend convinced that the economy is recovering nicely and that any inflation that we might be seeing in labor and other costs is temporary,” Peter Tuz, president of Chase Investment Counsel in Charlottesville, Virginia.
Unofficially, the Dow Jones Industrial Average rose 40.14 points, or 0.12%, to 34,569.59, the S&P 500 lost 2.97 points, or 0.07%, to 4,201.14 and the Nasdaq Composite dropped 16.31 points, or 0.12%, to 13,732.43.
Along with financials and energy, the small-cap Russell 2000 rose sharply on Tuesday, underscoring strength for segments of the stock market expected to do particularly well in an expanding economy.
“The economy certainly is growing and that’s a positive, and again it’s a positive for the most cyclical parts of the stock market,” said Kristina Hooper, chief global market strategist at Invesco in New York.
While the S&P 500 remains within about 1% of its record high after four straight months of gains, investors are worried about whether rising inflation could hit equity prices.
Stock markets on Friday brushed off a surge in key inflation readings for April following reassurances from Federal Reserve officials that the central bank’s ultra-loose monetary policy would remain in place.
Minneapolis Federal Reserve Bank President Neel Kashkari and Fed Vice Chair for supervision Randal Quarles on Tuesday reiterated the view that higher prices would be transitory.
This week’s focus will be on a raft of economic data, culminating with U.S. payrolls due on Friday.
Abbott Labs shares fell after the company cut its full-year 2021 profit forecast, citing expectations for a sharp decline in revenue from its COVID-19 tests as more Americans get vaccinated. Shares of other test makers also fell.
Cloudera Inc shares jumped after private equity firms KKR & Co and Clayton Dubilier & Rice LLC agreed to take the data analytics firm private.
A group of “meme stocks” extended gains from the previous week, with shares of AMC Entertainment Holdings Inc rising after the movie theater chain said it sold $230 million of its stock.
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