Canada’s main stock index managed to eke out a gain on Wednesday despite weakness in the financials sector as Royal Bank of Canada became the latest lender to report disappointing earnings and a slew of analysts downgraded ratings and price targets on the Bank of Nova Scotia.
Uranium stocks were a notable bright spot, surging across the board after Japan announced it will restart more idled nuclear plants and look at developing next-generation reactors. It sets the stage for a major policy shift on nuclear energy a decade after the Fukushima disaster.
Cameco Corp. closed up 14.9 per cent and Denison Mines Corp. 17.6 per cent. The Global X Uranium ETF, which holds about 50 stocks with involvement in the uranium power industry and is one of the most popular ways to gain exposure to the sector, rose 11.5 per cent. Uranium stocks plunged after the Fukushima disaster. While many are still down from 2011, they have recently been attracting investors thanks to the movement towards clean energy sources.
The Toronto Stock Exchange’s S&P/TSX composite index ended up 36.03 points, or 0.2%, at 20,021.38.
Wall Street also rose as investors awaited the U.S. Federal Reserve’s Jackson Hole conference this week.
“The TSX is holding up despite an increase in Canadian bond yields which have negatively impacted share prices in recent sessions,” said Brandon Michael, senior investment analyst at ABC Funds.
“The downtrend has been broken but markets are still looking for direction and where the next move is going to be.”
The Canadian 10-year yield on Wednesday touched its highest level in nearly five weeks at 3.129%.
The TSX has rallied about 10% from its mid-July lows. It is expected to advance through the end of the year and then approach a record peak in 2023, a Reuters poll found.
The energy sector rose 1.1% as oil prices climbed. U.S. crude oil futures settled 1.2% higher at $94.89 a barrel.
The materials group, which includes precious and base metals miners and fertilizer companies, added 1.5%.
It was helped by a 24% jump in the shares of Turquoise Hill Resources Ltd after global miner Rio Tinto sweetened its takeover proposal for the 49% stake of the company it does not already own.
The heavily weighted financials sector fell 1.1%, with shares of RBC dropping 2.6% after missing analyst estimates for third-quarter profit.
“We’re seeing housing get hit hard with rising mortgage rates and so it’s no wonder you’re going to see banking take it on the chin a little bit,” said Allan Small, senior investment adviser of the Allan Small Financial Group with iA Private Wealth.
The Bank of Nova Scotia kicked off the earnings season on Tuesday with disappointing results, especially at its capital markets and international operations. Four analysts downgraded their ratings on Wednesday, including one to a sell recommendation. Scotiabank closed down 2% after falling by more than 5% on Tuesday.
Wall Street was lifted by gains in energy stocks.
Boosting the tech-heavy Nasdaq, Intuit Inc rallied almost 4% after the accounting software maker forecast upbeat fiscal 2023 revenue.
After the bell, Salesforce Inc dipped 5.5% following its quarterly report. During the trading session, the business software seller had gained 2.3%.
All 11 S&P 500 sector indexes rose, led by energy, up 1.2%, followed by a 0.71% gain in real estate.
The S&P 500 lost ground in the previous three sessions after a summer rally was halted by growing concerns of an aggressive stance by the Fed, an energy crisis in Europe and signs of economic slowdown in China.
Investor are now focused be on the Jackson Hole symposium that begins on Thursday, with remarks from Fed Chair Jerome Powell on Friday potentially providing clues about the pace of future rate hikes and whether the central bank can achieve a “soft landing” for the economy.
“The market is biding its time to get more information on the most important things, which are inflation and the Fed’s rate path,” said Tom Martin, senior portfolio manager at GLOBALT Investments in Atlanta.
Traders are divided between expecting a 50-basis point hike and a 75-basis point hike by the U.S. central bank.
President Joe Biden said the U.S. government will forgive $10,000 in student loans for many debt-saddled college-goers, a move that could boost support for his fellow Democrats in the November congressional elections but also may fuel inflation.
Helped by corporate quarterly results that were not as bad as feared, the S&P 500 has recovered 13% from its mid-June lows. The benchmark index is set to end the year a little above its current level, according to strategists recently polled by Reuters.
The S&P 500 climbed 0.29% to end the session at 4,140.77 points.
The Nasdaq gained 0.41% to 12,431.53 points, while Dow Jones Industrial Average rose 0.18% to 32,969.23 points.
Peloton Interactive surged over 20% after the stationary bike company said it would sell its products on Amazon in a bid to boost sales that have dropped following the end of pandemic lockdowns.
Nordstrom Inc tumbled almost 20% after the retailer cut its annual revenue and profit forecasts, a sign that inflation is squeezing consumer spending on its high-end clothing and footwear.
Advancing issues outnumbered falling ones within the S&P 500 by a 2.5-to-one ratio.
The S&P 500 posted two new highs and 30 new lows; the Nasdaq recorded 42 new highs and 104 new lows.
Volume on U.S. exchanges was relatively light, with 8.9 billion shares traded, compared to an average of 10.9 billion shares over the previous 20 sessions.
With files from Reuters
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Darcy Keith