Energy stocks help Toronto market hit another high as oil prices inch up

Energy stocks helped lift Canada's main stock index to another record close Tuesday as the price of oil also ticked higher, while the loonie was down a touch ahead of the Bank of Canada's interest rate decision Wednesday.

The S&P/TSX composite index closed up 96.38 points at 16,548.72 to top the record close set a day earlier.

The new high marks a significant recovery for the index, which is up more than 10 per cent from the lows of February, said Craig Jerusalim, portfolio manager at CIBC Asset Management.

"It's nice to see strength returning to the Canadian equity markets, largely being led by commodities, but financials have also done quite well as well as select other sectors."

The rise in equities comes as the price of crude has climbed about 25 per cent since its low of about US$59 a barrel in February. On Tuesday, crude was up slightly with a 26 cent gain to close at US$74.11 per barrel for the August contract.

In New York, the Dow Jones industrial average ended up 143.07 points at 24,919.66. The S&P 500 index closed up 9.67 at 2,793.84 and the Nasdaq composite index was up 3 points at 7,759.20.

The S&P also closed at its highest since February, but Jerusalim noted that U.S. markets look to have higher expectations built into its valuations.

"The nice thing about the TSX, as opposed to the S&P 500, is that valuations are still relatively close to longer-term averages for the TSX, whereas the S&P 500, the price to earnings multiple is not at all-time highs, but is at the higher end of the historic range, which means there's further room to correct."

The lower valuations for Canadian stocks means it could be a better bet going forward, as long as trends aren't destabilized, he said.

"Looking forward, assuming that trade rhetoric doesn't ramp up, and commodity prices don't move drastically from where they are, I would be more favourable towards Canadian equities than U.S. equities, when looking out over the next year or so."

The Canadian dollar averaged 76.19 cents US, down 0.16 of a US cent. The loonie jumped last week on expectations of the Bank of Canada raising rates Wednesday, but has lost ground against the U.S. dollar as data looks even stronger to the south, said Jerusalim.

"The pace of rate hikes is likely going to be more consistent from the Fed, which should lead, with all else equal, to a stronger U.S. dollar relative to the Canadian dollar."

He said the Bank of Canada is expected to release a dovish rate hike.

"What that means is we're likely going to see a rate hike accompanied by commentary that dampens the likelihood of further rate hikes any time soon."

The August natural gas contract was down four cents at US$2.79 per mmBTU. The August gold contract ended down $4.20 at US$1,255.40 an ounce and the September copper contract was down a penny at US$2.84 a pound.

Alimentation Couche-Tard Inc. closed up $3.80 or 6.67 per cent at $60.80 after the company, Canada's largest by revenues, reported better than expected earnings.