S & P / TSX composite has best day of the year as crude hits two-month high
TORONTO – The main Canadian stock index had its strongest day of 2022 as the price of oil closed above US $ 80 per barrel to hit its highest level in two months.
At the same time, US Federal Reserve Chairman Jerome Powell reassured investors during his confirmation hearing that the central bank was ready to tackle persistent inflation by raising interest rates.
“This is the message he has been very transparent about since removing the term transient from his previous comments. So I think the market is now getting very comfortable with the assumption that rates will go up, ”said Sid Mokhtari, executive director of institutional equity research at CIBC.
Many market watchers expect the Fed to hike rates up to four times starting in March.
Meanwhile, US bond yields stabilized at around 1.75% after briefly breaking above 1.8% on Monday.
“A lot of us are always looking for higher levels as we move through the year and that should always drive the talk of value over growth,” he said in an interview.
Tightening rates – a situation that allows banks to borrow at lower interest rates and lend at higher rates – is positive for cyclicals, financials and the TSX as a whole.
The S & P / TSX Composite Index gained 202.49 points on Tuesday to 21,274.81 after starting the morning decline.
In New York, the Dow Jones Industrial Average was up 183.15 points to 36,252.02. The S&P 500 Index was up 42.78 points to 4,713.07, while the Nasdaq Composite was up 210.62 points to 15,153.45.
The tech sector rebounded while so-called value sectors such as energy and financials continued to outperform.
“This is the story of the rotation that we have seen over the past few weeks,” Mokhtari said.
“The TSX index is by definition a value index, primarily linked to energy performance as well as financial data. “
Energy was the star, posting the best performance of the eight rising sectors on Tuesday. It gained 3.3 percent with shares of Secure Energy Service Inc. rising 9.2 percent and Baytex Energy Corp. by seven percent.
The February crude contract rose US $ 2.99 to US $ 81.22 per barrel and the February natural gas contract rose 17 cents to US $ 4.25 per mmBTU.
In fact, commodities had a strong performance thanks to improvements in crude, lumber, industrial metals and agriculture, which is generally a by-product of a reflationary environment, said Mokhtari.
He said the crude was a bit overbought but was going in the right direction.
“We really don’t see much of a challenge for that until he comes close to. . . the previous levels we had in October were between $ 84-85, so there is still more potential. But it’s very sticky as we get to those levels.
Materials rose as well, as gold and copper prices both rose amid a weakening US dollar, shares of Lithium Americas Corp. having increased by almost 13%.
The February gold contract was up US $ 19.70 to US $ 1,818.50 per ounce and the March copper contract was up 7.7 cents to US $ 4.43 per ounce. delivered.
The Canadian dollar was trading at 79.33 cents, the highest level since mid-November and compared to 78.87 cents US on Monday.
Technology rose 1.3% as Nuvei Corp. climbed 8.9% as Lightspeed Commerce Inc. and Shopify Inc. posted their first gains of the year.
Mokhtari expects Shopify to likely be “range-limited” for a while, while Lightspeed faces a harder hill to climb after its stock collapses following a salesperson’s report to discovered last fall.
“He has to go through a few quarters to be able to deliver what they have said in the past and be able to show resilience to the price review.”
This report by The Canadian Press was first published on January 11, 2022.
Companies in this story: (TSX: LSPD, TSX: SHOP, TSX: SES, TSX: BTE, TSX: NVEI, TSX: GSPTSE, TSX: CADUSD = X)