Heavyweight financials sector powers S&P/TSX composite to second-best day of year

Heavyweight financials sector powers S&P/TSX composite to second-best day of year

TORONTO — Canada’s main stock index had its second-best day of the year following strong bank results and hopes that the war in Ukraine will temper aggressive interest rate hikes next month.

Greg Taylor, chief investment officer of Purpose Investments said Friday’s strong market gains were a continuation of the bounce since Thursday morning.

“It really seems it’s all about that with some of the tensions in Ukraine that’s pushed back some of the more hawkish expectations from the Fed,” he said in an interview.

The S&P/TSX composite index closed up 344.07 points to 21,106.00. It follows a volatile session which saw a near 350-point swing on the day.

Energy led the way, gaining 2.3 per cent despite a drop in crude oil prices, a day after breaching US$100 per barrel.

The April crude contract was down US$1.22 at US$91.59 per barrel and the April natural gas contract was down 17.1 cents at US$4.47 per mmBTU.

Baytex Energy Inc. surged 14.2 per cent after reporting strong quarterly results and indicating it will reduce debt and reward shareholders.

The heavyweight financials sector wasn’t far behind, getting a lift from banks after CIBC and National Bank beat expectations and posted strong first-quarter results.

“The banks are one of the bright spots today in the market, recovering a lot of the losses from yesterday,” Taylor said.

He said the performance from Canadian banks was a bit surprising because U.S. banks had earlier missed expectations and had problems containing expenses, which didn’t seem to be a problem here as northern banks also benefited from positive trading and capital markets activity.

In New York, the Dow Jones industrial average had its best day since May 2020 by climbing 834.92 points or 2.5 per cent to 34,058.75. The S&P 500 index was up 95.95 points at 4,384.65, while the Nasdaq composite was up 221.03 points at 13,694.62.

Hopes about upcoming interest rate hikes was the primary support for markets ending strongly following a ruckus week of trading, said Taylor.

People had come to expect rates would increase by 50 basis points as central banks aimed to tackle high inflation, he said. But he added you don’t want to be too aggressive in trying to slow things down in the face of economic uncertainty.

“So with that it’s probably going to be enough to be an excuse for them to not do 50 basis points and do 25 and be more measured in their pace, which is good for the tech stocks and should be good for the markets.”

Another factor in the big swing in markets over the past couple of days is that sanctions against Russia aren’t as aggressive as originally thought. They don’t curtail energy supplies from Russia into Europe and they avoid kicking Russia out of the SWIFT banking system.

“So far what we’ve seen out of the sanctions (is they) are more targeted at Russia and less so at the commodities in general, and I think that’s caused a bit of a relief in the markets.”

Materials was also higher even as gold came off the high approaching US$2,000 an ounce.

The April gold contract was down US$38.70 at US$1,887.60 an ounce and the May copper contract was up 2.4 cents at US$4.49 a pound.

Taylor said investors haven’t put much stock in suggestions that markets responded favourably to Russian Vladimir Putin’s reported offer to send a delegation to Minsk for negotiations with Ukraine, providing Ukraine first surrenders.

The Canadian dollar traded for 78.45 cents US compared with 77.93 cents US on Thursday.

The technology also moved into positive territory as all 11 major sectors of the TSX were up on Friday.

Shopify shares increased 1.1 per cent after gaining 6.4 per cent in Thursday’s rally.

Nonetheless, Taylor said the Ottawa-based e-commerce company’s stocks have been one of the biggest disappointments this year. They’re down 50.6 per cent year-to-date and 61.4 per cent from its record high.

“Most would have thought it would recover more given how much it’s been down on the year, so it probably signals there’s still a lot of investor concern just about Shopify’s business model and the valuation of that company.”

This report by The Canadian Press was first published Feb. 25, 2022.

Companies in this story: (TSX:BTE, TSX:SHOP, TSX:CM, TSX:NA, TSX:GSPTSE, TSX:CADUSD=X)

Ross Marowits, The Canadian Press