Skip to main content

U.S. stocks closed higher on Monday, at the end of a volatile month for Wall Street where the tech-heavy Nasdaq narrowly avoided its worst ever start to the year and the S&P 500 recorded its weakest January performance since 2009. The TSX enjoyed its best session of the year Monday, highlighted by a 10.1% surge in the price of Shopify stock.

The Toronto Stock Exchange’s S&P/TSX composite index ended up 356.54 points, or 1.7%, at 21,098.29, its highest closing level since Jan. 19 and the biggest advance since Dec. 21. For the month, the TSX was down 0.6%.

Despite the return of dip buyers on Monday, investors doubted it was smooth sailing ahead for the market after a turbulent January.

“This is a snap back from oversold conditions,” said Joseph Abramson, co-chief investment officer at Northland Wealth Management. “Markets are going to remain choppy for a while because we are moving into a rising rate environment and growth is going to slow.”

Technology shares have been among the most volatile in recent weeks as expectations rose of faster interest rate hikes by the Federal Reserve and the Bank of Canada.

The TSX’s tech sector advanced 5.1% on Monday, aided in large part by Shopify’s rally. The company has the third largest market capitalization on the Toronto market.

The heavily-weighted financials group climbed 1.3%, while energy was up 0.8% as a supply shortage and political tensions helped oil prices notch their biggest monthly gain in almost a year. U.S. crude futures settled 1.5% higher at $88.15.

Gold and copper prices also rose, giving the TSX materials group a boost. It added 1.9%.

In early Monday trading, the Nasdaq was on course to surpass its worst opening-month performance on record, when it fell 9.89% in 2008. However, after its best one-day gain since March 2021, it closed out January down 8.99%.

“At the end of the day, interest rates are going to have to move higher, and companies with high multiples will have to trade lower,” said Decio Nascimento, chief investment officer of Norbury Partners.

He added that, with costs such as wages rising, there will be increased investor focus on sectors that can better handle those inflationary pressures, with less latitude for companies which promise future growth but which currently generate negative cash flow.

All of the 11 major S&P sectors advanced, led by a 3.8% rise in consumer discretionary stocks. The gain was led by Tesla Inc, which jumped 10.7% after Credit Suisse raised the electric car maker’s stock rating to “outperform”.

For January though, consumer discretionary was the worst performing sector, slipping 9.7%. In all, only the energy sector ended the month in positive territory, aided by oil prices hitting their highest level since October 2014 on Friday.

Overall, the bellwether S&P 500 had its worst overall month since the pandemic-led crash in March 2020.

The U.S. Federal Reserve last week signaled it intends to combat the four-decade high inflation by hiking key interest rates more aggressively than many market participants expected.

Fed funds futures traders are pricing in almost five rate increases by year-end, with some banks, such as the Bank of America now eyeing seven hikes this year.

“What the Fed did last week was to widen the spectrum of possibility of what rates could be in a year or two, so when you do that, you are going to create volatility in equities” said Norbury Partners’ Nascimento.

Geopolitical tensions have added to market uncertainty, with the U.S. and its allies threatening Russia with new economic sanctions if it attacks Ukraine.

The Dow Jones Industrial Average rose 406.39 points, or 1.17%, to 35,131.86, the S&P 500 gained 83.7 points, or 1.89%, to 4,515.55 and the Nasdaq Composite added 469.31 points, or 3.41%, to 14,239.88.

Boeing Co rose 5.1%. The U.S. planemaker secured a launch order from Qatar Airways for a new freighter version of its 777X passenger jet and a provisional order for 737 MAX jets.

Citrix Systems Inc’s shares fell 3.4% after the software company said it had agreed to be taken private for $16.5 billion including debt by affiliates of Elliott Management and Vista Equity Partners.

Volume on U.S. exchanges was 12.67 billion shares, compared with the 12.37 billion average for the full session over the last 20 trading days. The S&P 500 posted eight new 52-week highs and no new lows; the Nasdaq Composite recorded 30 new highs and 45 new lows.

Yields of U.S. Treasuries that are most sensitive to inflation expectations hovered near their highest levels since February 2020 on Monday, capping a bond market selloff this month that by some measures is the worst in 13 years.

The yield on 10-year Treasury notes was up 0.9 basis points to 1.789%, while the two-year U.S. Treasury yield, which typically moves in step with interest rate expectations, was up 0.5 basis points at 1.177%

Investors will eye big U.S. data releases this week include the ISM readings on manufacturing and services, and the January jobs report.

The headline U.S. payrolls number is expected to be soft given a surge in COVID-19 cases and adverse weather. The median forecast if for a rise of just 155,000, while forecasts range from a gain of 385,000 to a drop of 250,000.

Reuters, Globe staff

Be smart with your money. Get the latest investing insights delivered right to your inbox three times a week, with the Globe Investor newsletter. Sign up today.