Canada’s main stock index rose on Monday to its highest level in nearly two weeks, aided by gains in resource-linked shares and an upbeat mood in global equities, although Bombardier Inc tumbled to its lowest in 15 months. U.S. equities ended modestly lower, with traders reluctant to make moves ahead of the second-quarter earnings season.
The Toronto Stock Exchange’s S&P/TSX composite index ended up 195.41 points, or 1%, at 19,258.32, its highest closing level since June 15.
Although Wall Street shares closed lower, global markets generally held on to Friday’s rally as the recent pullback in commodity prices tempered concerns of prolonged inflation.
Investors have worried that aggressive central bank interest rate hikes to cool inflation could derail economic growth.
“Today’s pick up in risk appetite is simply that maybe rates will not be hiked as far as thought previously,” said Stuart Cole, head macro economist at Equiti Capital.
“There is also talk about a rebalancing by large institutional investors taking place as we reach the end of the first half of the year, moving back into stocks on the back of this perceived brighter outlook and reduced worry about recession.”
Canada’s commodity-linked market is on track to fall 12% in the second quarter, which would be its biggest decline since the first quarter of 2020.
The energy sector rallied 4.7% on Monday as oil prices rose. U.S. crude oil futures settled 1.8% higher at US$109.57 a barrel as the Group of Seven nations promised to tighten the squeeze on Russian President Vladimir Putin’s war chest while actually lowering energy prices.
The materials group, which includes precious and base metals miners and fertilizer companies, added 2%, while heavily-weighted financials ended 0.7% higher.
Shares of business jet company Bombardier tumbled 17.3% to hit their lowest since March 2021.
A former Garuda Indonesia chief convicted of graft is being investigated for alleged irregularities in procuring Bombardier and ATR planes, Indonesia’s attorney general said.
U.S. stocks drifted lower amid few catalysts to sway investor sentiment as they approach the half-way point of a year in which the equity markets have been slammed by heightened inflation worries and tightening Fed policy.
The major U.S. stock indexes lost ground after oscillating earlier in the session, with weakness in interest rate sensitive megacaps such as Amazon.com, Microsoft Corp and Alphabet Inc providing the heaviest drag.
“The reason for lack of direction this week and next week is investors are looking for what’s going to happen in the second quarter reporting period,” said Sam Stovall, chief investment strategist of CFRA Research in New York.
All three indexes are on course to notch two straight quarterly declines for the first time since 2015. They also appear set to post losses for June, which would mark three consecutive down months for the tech-heavy Nasdaq, its longest losing streak since 2015.
The S&P was on track to report its fifth worst year-to-date price decline since 1962 as of Friday, Stovall said.
“Every time the SPX rose by more than 20% in a year it fell by an average of 11% starting relatively early in the new year. And all years where the decline started in the first half got back to break even before the year was out.”
“No guarantee that’s going to happen this year, but the market could surprise us to the upside,” Stovall said.
Rising oil prices helped put energy stocks out front in the U.S. market, with economically sensitive smallcaps and semiconductors and transports also outperforming the broader market.
Economic data surprised to the upside, with new orders for durable goods and pending home sales beating expectations and adding credence to U.S. Federal Reserve Chairman Jerome Powell’s assertion that the economy is robust enough to withstand the central bank’s attempts to rein in decades-high inflation without sliding into recession.
The Dow Jones Industrial Average fell 62.42 points, or 0.2%, to 31,438.26, the S&P 500 lost 11.63 points, or 0.3%, to 3,900.11 and the Nasdaq Composite dropped 93.05 points, or 0.8%, to 11,514.57.
Among the 11 major sectors of the S&P 500, eight ended the session in negative territory, with consumer discretionary suffering the largest percentage loss. Energy stocks were the clear winners, gaining 2.8% on the day.
With several weeks to go until second-quarter reporting commences, 130 S&P 500 companies have pre-announced preliminary results. Of those, 45 have been positive and 77 have been negative, resulting in a negative/positive ratio of 1.7 stronger than the first quarter but weaker than a year ago, according to Refinitiv data.
Shares of retail stock trading platform Robinhood Markets rose 14% after media reports said Goldman Sachs changed the stock to “neutral” from “sell”.
But the broker double downgrade of cryptocurrency exchange Coinbase Global Inc’s shares to “sell” from “buy”, sent its stock sliding 10.8%.
Advancing issues outnumbered declining ones on the NYSE by a 1.17-to-1 ratio; on Nasdaq, a 1.02-to-1 ratio favored decliners. The S&P 500 posted one new 52-week high and 29 new lows; the Nasdaq Composite recorded 24 new highs and 84 new lows. Volume on U.S. exchanges was 10.91 billion shares, compared with the 12.95 billion average over the last 20 trading days.
Reuters, Globe staff
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