TORONTO — North American stock markets ended a wild first trading week of the year by rebounding strongly Friday on positive trade, employment and interest rate news and a further boost in the price of oil.
A day after plummeting on concerns about Chinese growth, markets recovered on improved sentiment as the U.S. and China are set to resume trade talks, U.S. jobs numbers soared in December and the Federal Reserve chairman suggested it may slow rate hikes.
“I think it’s three items that came together to say maybe we’re in an environment where job gains are strong, wage growth is actually improving and then combine that with maybe we don’t have to be afraid of monetary policy tightening and you have at the very least people being less pessimistic,” says Patrick Blais, senior portfolio manager at Manulife Asset Management.
The S&P/TSX composite index closed up 213.87 points or 1.5 per cent to 14,426.62 after hitting an intraday high of 14,438.27.
The broad-based rally was led by the energy sector, which gained 3.1 per cent, on higher oil prices.
The February crude contract was up 87 cents US at US$47.96 per barrel after a report that U.S. crude inventories remained essentially unchanged. The February natural gas contract was up 9.9 cents at US$3.04 per mmBTU.
The price of West Texas Intermediate crude gained 5.8 per cent over the week to nearly $50. Blais expects WTI will rise to around US$60 per barrel this year once the supply-demand dynamic is brought back into balance.
Cyclical sectors like technology, consumer discretionary and industrials that fell during selloffs gained on the day. Five companies saw their share prices increase by at least three per cent Friday — Nutrien Ltd., Brookfield Asset Management Inc., Suncor Energy Inc., Manulife Financial and Canadian Natural Resources Ltd.
In New York, the Dow Jones industrial average gained 3.3 per cent or 746.94 points at 23,433.16 a day after losing 660 points. The S&P 500 index was up 84.05 points at 2,531.94, while the tech-heavy Nasdaq composite was up 4.3 per cent or 275.35 points at 6,738.86. Apple Inc. partially recovered its 10 per cent loss on Thursday by closing up 4.2 per cent.
Blais said investors should brace for a continued roller coaster ride as markets compare news and upcoming earnings with expectations.
“I think we’re setting ourselves up for volatility on the upside and on the downside,” he said, adding there’s a bifurcated view of the market.
The Canadian dollar traded at an average of 74.57 cents US compared with an average of 74.02 cents US on Thursday.
The February gold contract was down US$9 at US$1,285.80 an ounce and the March copper contract was up 7.95 cents at US$2.65 a pound.
The recent pullback has given investors an opportunity to buy quality names such as Canadian Natural Resources Ltd. and Nutrien Ltd. that are down more than 15 per cent from their highs rather than try to guess on the market’s path, Blais added
“It’s probably not a bad time for investors to step in at the very least in a measured fashion.”
Companies, index and currency in this story: (TSX:CNQ, TSX:NTR, TSX:BAM.A, TSX:SU, TSX:MFC, TSX:GSPTSE, TSX:CADUSD=X)
Ross Marowits, The Canadian Press