TORONTO — A broad rally pushed Canada’s main stock index up more than 200 points as the energy and materials sectors gained on strong quarterly reports from key players.
Energy increased 3.9 per cent as natural gas prices hit their highest level since 2008. The materials sector, which includes mining, forestry and fertilizer companies, rose 2.3 per cent as gold prices moved higher.
Corporate results supported the gains as shares of MEG Energy Inc. and fertilizer producer Nutrien Ltd. increased 6.0 and 4.9 per cent, respectively in reaction to strong quarterly results. NuVista Energy Ltd. increased 7.4 per cent to lead a good day for Canadian producers.
MEG Energy says higher energy prices contributed to it earning a $362-million profit in its latest quarter as revenues surged 68 per cent. Nutrien reported a record US$1.4 billion in first quarter profits as the war in Ukraine drove up commodity prices and raised concerns about global food security.
The heavyweight financials sector was up nearly one per cent with Canadian banks seeing their share prices climb.
The S&P/TSX composite index closed up 213.06 points to 20,905.28.
In New York, the Dow Jones industrial average was up 67.29 points at 33,128.79. The S&P 500 index was up 20.10 points at 4,175.48, while the Nasdaq composite was up 27.74 points at 12,563.76.
“With little in the way of any market-moving economic data, it would appear that investors are stepping in to buy the dip ahead of tomorrow’s highly anticipated Federal Reserve meeting, where officials are widely expected to raise interest rates by 50 basis points,” said Candice Bangsund, portfolio manager for Fiera Capital.
She said economically sensitive sectors led Tuesday’s advance. They typically do well in an environment of rising interest rates and accelerating inflation, while growth sectors like technology underperform.
This trend has resulted in the TSX outperforming the S&P 500 and the Nasdaq. Canada’s technology sector was up one per cent with Shopify Inc. up 2.4 per cent.
Bangsund said markets have largely priced in the hawkish move by the U.S. central bank, with some traders on the cusp of pricing in a 75 basis point move at the June meeting.
“So I think the bar for a hawkish surprise from the Fed will be quite high and if the Fed goes ahead and raises interest rates by 50 basis points, that will largely be in line with what was expected going into the meeting,” she said in an interview.
“As long as the Fed produces that 50 basis point rate hike and a QT or a quantitative tightening announcement, I think that market response should be fairly muted.”
The June crude contract was down US$2.76 to US$102.41 per barrel and the June natural gas contract was up 47.9 cents at US$7.95 per mmBTU after hitting a high of $8.17.
Bangsund said oil prices softened on worries about demand stemming from COVID-19 lockdowns in China that offset lingering supply concerns stemming from the Russia-Ukraine conflict that shows no end in sight.
“So I think the geopolitical conflict will ultimately place the floor under prices, though today the focus is largely on the outlook for demand given the deteriorating growth backdrop in China.”
The Canadian dollar traded for 77.84 cents US compared with 77.55 cents US on Monday.
The June gold contract was up US$7.00 at US$1,870.60 an ounce and the July copper contract was up one 1.5 cents at US$4.28 a pound.
Health care was one of four sectors that lagged. Industrials dipped even though Air Canada shares were up 3.7 per cent.
This report by The Canadian Press was first published May 3, 2022.
Companies in this story: (TSX:NVA, TSX:MEG, TSX:NTR, TSX:GSPTSE, TSX:CADUSD=X)
Ross Marowits, The Canadian Press