Toronto stock market moves higher while crude oil rises for fifth straight day

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TORONTO — Technology and utilities led Canada's main stock index higher Tuesday while the price of crude rose for a fifth-straight day.

Shopify Inc. gained more than four per cent ahead of the release of its quarterly results as it inched closer to overtaking the Royal Bank of Canada as the country's most valuable company.

"We're getting close," said Greg Taylor, chief investment officer of Purpose Investments.

The earnings results will be a key indication if "it can put up numbers to justify the moves."

The Ottawa-based company's growth comes as banks have been lagging, which is a concern for a healthy market environment, he said.

"And that goes just to concern about small businesses, and what's going to happen with the economy and the reopening," Taylor said.

The technology sector gained nearly 2.2 per cent on the day.

Nine of the 11 major sectors on the TSX were higher as the S&P/TSX composite index closed up 66.52 points at 14,811.56.

In New York, the Dow Jones industrial average was up 133.33 points at 23,883.09. The S&P 500 index was up 25.70 points at 2,868.44, while the Nasdaq composite was up 98.41 points at 8,809.12.

"It feels like we're still in the midst of that reopening rally," Taylor said, adding that investors are starting to be a little more optimistic about what the normal state of the economy is going to be.

In doing so, investors have overlooked negative data, including Tuesday's weak reports on the U.S. services sector and Canada's larger trade deficit.

The ISM nonmanufacturing index dropped last month to its lowest level in more than a decade, while Canada's deficit increased to $1.41 billion in March amid lower demand for oil.

The market recovery in April may be a "little overdone" considering there's likely to be lots of problems with economic reopenings.

"I think we're also now completely overlooking a second wave of virus infections. So you could say the optimism is getting a little ahead of itself in the near term."

Economic data was expected to be horrific because of the COVID-19 pandemic, but the risk to markets is going to be in the summer and fall if the numbers don't improve, he said

Materials was up nearly one per cent despite a slip in the price of gold as shares of B2Gold Corp. gained nearly 3.3 per cent.

The June gold contract was down US$2.70 at US$1,710.60 an ounce and the July copper contract was up two cents at US$2.33 a pound.

The Canadian dollar traded for 71.27 cents US compared with an average of 71.00 cents US on Monday.

The energy sector was slightly positive as shares of MEG Energy Corp. and Cenovus Energy Inc. were up 16.1 and 7.8 per cent respectively.

Energy is being helped by lower supply and an uptick in demand as economies start to reopen and driving increases after long lockdowns to prevent the spread of the novel coronavirus.

The June crude oil contract was up US$4.17 or about 20 per cent at US$24.56 per barrel and the June natural gas contract was up 14.1 cents at US$2.13 per mmBTU.

While the price of oil has more than doubled since its low, not many companies are able to make money unless the price moves to about US$40 per barrel or higher, said Taylor.

"So what we're seeing really now is more of a sentiment bounce ... but the sector is definitely not out of the woods yet."

Taylor said most analysts forecast that the U.S. benchmark will be in the US$30 to US$40 range for the rest of the year unless there's a second wave of infections and a new lockdown.

"That's not in the models and that would be a fairly big negative. But I don't see it running away on the upside either. So I think a range-bound commodity price would be probably the best-case scenario for oil."

This report by The Canadian Press was first published May 5, 2020.