Strength in energy stocks as the price of oil once again topped US$80 per barrel helped lead a broad rally on the Toronto Stock Exchange Monday, lifting Canada’s main stock index almost 200 points, while U.S. stock markets also climbed.
Materials, energy and commodities helped the TSX outperform its U.S. counterparts as news of more economic stimulus in China provided some hope, said Stephen Duench, vice-president and portfolio manager for AGF Investments Inc.
The S&P/TSX composite index closed up 189.39 points at 20,025.14.
In New York, the Dow Jones industrial average was up 213.08 at 34,559.98. The S&P 500 index was up 27.60 points at 4,433.31,while the Nasdaq composite was up 114.48 points at 13,705.13.
It’s been an overall weak, choppy month of August, with Monday marking the first time the S&P 500 has ended the day positive back-to-back, Duench said.
“We’ve had a lot of consolidation in this market in August,” said Duench.
“Sometimes after those consolidations, you just get these bounce-back rallies.”
As earnings season trickles to a close, the rest of the Canadian banks are set to report results this week, beginning on Tuesday. Investors will continue to focus on expense management, said Duench.
In the U.S., there’s a slew of economic data coming that will help investors get a clearer picture of what the U.S. Federal Reserve is working with for its September interest rate decision, said Duench, with particular focus on jobs and GDP.
The question is how much staying power the economic strength will have, said Duench, and whether the gradual slowdown of the past few months will continue.
This data-filled week comes on the heels of a “balanced” speech by Fed chairman Jerome Powell on Friday, he said.
“This week being so heavy on the economic data front will be very important for investors to be able to map out the interest rate trajectory for the rest of this year.”
Canada will also see its latest GDP report at the end of the week.
“They are expecting a cool down and negative month-over-month number. If it’s that or lower, I do think that would benefit bonds, especially in Canada,” said Duench.
Bond yields have been rising in recent weeks, putting pressure on equities.
For investors right now, when it comes to economic data, “bad news is good news,” said Duench. Currently, central banks are expected to pause rates in September and raise later in the year, but those expectations could swing wildly depending on the data.
Much like the central banks, “investors are also data dependent, and will be watching weeks like this week that are heavy on the economic data front,” he said.
The Canadian dollar traded for 73.55 cents US compared with 73.50 cents US on Friday.
The October crude contract was up 27 cents at US$80.10 per barrel and the October natural gas contract was up less than a penny at US$2.67 per mmBTU.
The December gold contract was up US$6.90 at US$1,946.80 an ounceand the December copper contract was up less than a penny at US$3.79 a pound.