TSX outpaces U.S. stock markets on lift from commodities while tech under pressure

CTV National News: The cost of not doing business Canada lost 207,000 jobs last month, pushing the unemployment rate above eight per cent. CTV’s Melanie Nagy reports.

TORONTO — Commodities propelled Canada's main stock index to bounce back and outpace U.S. stock markets even as the Dow Jones industrial average hit an all-time high.

The S&P/TSX composite index closed up 122.71 points to 19,310.74 after hitting an intraday high of 19,340.25 that's 100 points off the record.

In New York, the Dow Jones was up 97.31 points at 34,230.34 after setting a record of 34,331.20 in earlier trading. The S&P 500 index was up 2.93 points at 4,167.59, while the Nasdaq composite was down 51.07 points at 13,582.43.

The TSX performance was helped by gains from its biggest sectors led by energy, materials and industrials.

The energy sector climbed 2.7 per cent despite a dip in crude oil prices on a drawdown in U.S. inventories that exceeded expectations.

The prospects of elevated demand as the global economy reopens is the main driver for the sector, said Greg Taylor, chief investment officer of Purpose Investments.

“It's a sector that most investors had written off over the last few years and really underinvested,” he said in an interview.

“And as people are getting more comfortable that oil can hold over $60 and people are looking that the driving season's coming back, that there's lots of demand as the economy really reopens, that could be putting a situation where the energy sector and the companies in it put up some good numbers.”

Quarterly results for the oilpatch have been strong.

Taylor said investors will need to start allocating more money toward energy because that's where a lot of the growth will be.

The June crude contract was down six cents at US$65.63 per barrel and the June natural gas contract was down 2.9 cents at nearly US$2.94 per mmBTU.

Shares of Canadian Natural Resources Ltd. 3.8 per cent with Suncor Energy Inc. was up 3.6 per cent.

Materials got a lift from higher prices for gold and continuing strong numbers for copper with Ero Copper Corp up 13.6 per cent, HudBay Minerals Inc. 8.7 per cent higher and Teck Resources Ltd. up 7.1 per cent.

The June gold contract was up US$8.30 at US$1,784.30 an ounce and the July copper contract was up 0.25 of a cent at US$4.52 a pound.

The Canadian dollar traded for 81.49 cents US compared with 81.20 cents US on Tuesday.

Meanwhile, technology was down 1.2 per cent as Shopify Inc. and BlackBerry Ltd. each lost 2.1 per cent.

The sector movements reinforce that a rotation is going on towards cyclicals and commodities and away from technology, said Taylor.

“Net-net that could be really good for the TSX in Canada starting to make up some ground.”

Stock markets generally rebounded from Tuesday's weakness after Treasury Secretary Janet Yellen walked back her remarks that interest rates would have to rise to prevent the economy from overheating.

Taylor said Yellen's comments spooked the tech sector which is more sensitive to higher rates and higher bond yields. He also said some people misinterpreted what she said because she's no longer chair of the Federal Reserve, which can change yields and rate policies.

He said her comments as Treasury Secretary were less a signal of what will happen with rates and more a reflection of the reality about inflation as she tries to figure out government finances and when to issue more debt.

“So it's almost two different nuances about what's going on and I think some of it was misinterpreted because everyone thinks of her as the Fed chair.

Investors are starting to focus on Friday's U.S. payroll numbers for April that could set a new direction for bond yields.

“As long as there's not a big shock there it looks like the rotation towards cyclicals is going to keep going,” said Taylor, noting the expectation is for close to one million jobs were added.

Anything way above that number is bad for markets because it will prompt people to worry about the Fed starting to taper some of its monetary stimulus.

“So I think the best outcome would be an inline number to slightly light for the markets and the fear is going to be if the economy is starting to run too hot.”

This report by The Canadian Press was first published May 5, 2021