North American stock markets marched higher to end the week despite historically bad jobs numbers resulting from the COVID-19 pandemic.
The S&P/TSX composite index closed up 132.87 points at 14,966.56 to end the week 2.4 per cent higher.
In New York, the Dow Jones industrial average was up 455.43 points at 24,331.32. The S&P 500 index was up 48.61 points at 2,929.80, while the Nasdaq composite was up 141.66 points at 9,121.32.
“I think there’s just extraordinary faith in the amount of fiscal and monetary policy that has been announced over the last six weeks or so,” said Giles Marshall, portfolio manager at Fiduciary Trust Canada.
Government and central banks in the U.S. and Canada have committed trillions of dollars to offset the impact of the novel coronavirus that has caused the global economy to come to a standstill.
The devastating employment impact was unveiled Friday. The Canadian unemployment rate surged to 13 per cent, a fraction below the all-time record, as almost two million people were out of work in April.
The numbers were better than expected, but would have been far worse if those receiving Canada Emergency Response Benefit were included. In that case the unemployment rate would have been closer to about 17.8 per cent, said Marshall.
In the U.S., the official unemployment rate moved to 14.7 per cent as 20.5 million people lost their jobs in April. The rate would be 22.8 per cent if it included those who gave up looking.
“The headline numbers are spinning maybe a little bit of a better story than the underlying numbers,” said Marshall.
Nonetheless, investors seem to be overlooking these numbers knowing they will be horrendous.
Marshall said there’s been some good news on the medical front, no good news on the economic front and some modest good news on earnings in information technology and health.
“Elsewhere, it’s been unrelentingly gloomy. But there is this incredible confidence in the monetary and fiscal stimulus, which has been unleashed, and I think the market is saying that we saw this playbook in the great financial crisis … and ultimately this is going to work.”
Marshall said he’s more skeptical that the result will be a quicker v-shaped recovery, adding there are lots of risks.
While there’s optimism about a vaccine being available later this year or next, there are more gloomy earnings and employment numbers to come for the next couple of months, along with the possibility of a second wave of infections and deaths.
The positive market sentiment was also supported Friday by better news on the trade front with China and the U.S. agreeing to put aside differences about the virus to announce they “fully expect to meet their obligations” under the Phase 1 agreement they signed in January.
Eight of the 11 major sectors on the TSX were higher led by consumer discretionary, energy and financials.
The consumer sector gained 2.9 per cent with BRP Inc. increasing 16.5 per cent after it secured a $600-million term loan.
Energy rose 2.7 per cent on stronger crude oil prices, which also helped the loonie.
The Canadian dollar traded for 71.77 cents US compared with an average of 71.35 cents US on Thursday.
The July crude contract was up US$1.34 at US$26.17 per barrel and the June natural gas contract was down 7.1 cents at US$1.82 per mmBTU.
That helped Enerflex Ltd. and Canadian Natural Resources to climb 11.1 and 5.7 per cent respectively.
The crude price has increased 126 per cent from its low but remains 56 per cent below where it started the year. It has been gaining from cuts in production and a slow increase in global demand as economies start to reopen.
Health care dropped on a seven per cent decrease by Aphria Inc., while technology was slightly lower as Shopify Inc. lost 2.7 per cent after issuing 1.85 million shares for about US$1 billion.
Materials fell as the price of gold dropped, while forestry companies were stronger on the day led by a 10.5 per cent gain from Norbord Inc.