S&P/TSX composite closes higher on lift from Wall Street relief rally

Canada’s main stock index got a lift from rising U.S. markets Thursday, closing higher in spite of weakness in the financials sector.

The S&P/TSX composite index was up 77.43 points at 20,337.21.

In New York, the Dow Jones industrial average was up 341.73 points at 33,003.57. The S&P 500 index was up 29.96 points at 3,981.35, while the Nasdaq composite was up 83.50 points at 11,462.98.

In Canada, the heavyweight financials sector fell 0.27 per cent, weighed down by Toronto-Dominion Bank, which reported a first-quarter profit Thursday of $1.58 billion _down from $3.73 billion a year earlier _ as it took a number of one-time charges including the cost to settle a lawsuit related to the Stanford Financial Group Ponzi scheme.

TD also said Thursday it was in talks with First Horizon to extend a May 27 deadline to acquire that company, as it did not expect to receive the regulatory approvals it needs by that date. TD’s share price fell 2.43 per cent to 88.46 on Thursday.

But Philip Petursson, chief investment strategist at IG Wealth Management, said weakness in the Canadian financials sector was offset by an equities rally south of the border, sparked when Federal Reserve Bank of Atlanta President Raphael Bostic said Thursday the U.S. central bank could be ready to pause interest rate hikes sometime this summer.

“The day opened down, and then swung to the positive, basically only on those comments,” Petursson said. “Rightly or wrongly, that is what is driving the equity market today.”

For months, North American stock movements have closely tracked every speech or public comment from the U.S. Federal Reserve. Fearing recession and the impact to stocks and other investments, investors have been looking for any indication that the central bank may be getting close to pressing pause on its rate hike cycle.

But so far, they are getting mixed signals. While some sectors, such as manufacturing and housing, appear to already be in recession, Petursson said other indicators still show an overheated economy. A U.S. report Thursday showed fewer workers applied for unemployment benefits last week for a third straight week, an indication the job market remains more resilient than expected.

While that seems like good news, it also raises fears that inflation is not slowing as fast as central banks would like and that additional, aggressive rate hikes may be coming.

“I think we can expect the markets to meander without solid direction, until we get confirmation from the Fed one way or the other that they’re going to be done,” said Petursson.

Shopify Inc. closed up 2.62 per cent to $55.97 per share, boosted by strength in the U.S. technology sector.

“Shopify is itself almost a proxy for U.S. technology. When U.S. technology stocks are rallying, as they are today on a more optimistic outlook from the U.S. Fed, Shopify will follow,” Petursson said.

Shopify, in turn, helped lift the entire S&P/TSX technology index, which rose 1.18 per cent Thursday.

The Canadian dollar traded for 73.45 cents US compared with 73.46 cents US on Wednesday.

The April crude contract was up 47 cents at US$78.16 per barrel and the April natural gas contract was down five cents at US$2.77 per mmBTU.

The April gold contract was down US$4.90 at US$1,840.50 an ounce and the May copper contract was down eight cents at US$4.08 a pound.