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S&P/TSX composite edges higher while loonie hits two-month high

TORONTO — A late rally pushed Canada's main stock index slightly higher Thursday while the loonie hit a two-month high despite lower crude prices.
A street sign along Bay Street in Toronto's financial district is shown on Tuesday, January 12, 2021. THE CANADIAN PRESS/Nathan Denette

TORONTO — A late rally pushed Canada's main stock index slightly higher Thursday while the loonie hit a two-month high despite lower crude prices. 

"Whenever you have one of these types of situations where materials, oil and gold in particular, or commodities, are doing well, our market does well. Today is a bit of a day off, so I think that you're seeing the result," said Allan Small, senior investment adviser at IA Private Wealth.

After being underwater for much of the day, the S&P/TSX composite rallied to close up just 5.71 points to 21,937.89. The Toronto market hit an intraday high of 22,018.00 and is up four per cent so far in 2022.

Meanwhile, U.S. stock markets continued their recovery to nearly wipe out all losses this year, weeks after falling into correction or bear territory. 

The Dow Jones industrial average was up 349.44 points at 34,707.94. The S&P 500 index was up 63.92 points at 4,520.16, while the Nasdaq composite was up 269.23 points at 14,191.84. 

Health care was the lone standout on the day, climbing 6.8 per cent as shares of cannabis producers surged after reports say the U.S. House of Representatives will vote next week on a bill to remove cannabis from a list of federally controlled substances.

Tilray Inc. gained 22.4 per cent while Canopy Growth Corp. was up 11.5 per cent and Aurora Cannabis Inc. was 10.5 per cent higher.

Consumer staples, financials and telecommunications were only slightly higher while seven sectors were lower, led by real estate.

Energy and materials were down slightly with shares of Meg Energy Corp. off 2.7 per cent.

Crude oil prices are up 27 per cent year-to-date but fell 2.3 per cent on the day as the May crude oil contract was down US$2.59 at US$112.34 per barrel. The May natural gas contract was up 17.2 cents at US$5.45 per mmBTU. 

Small said crude may have fallen because the seemingly weak Russian military performance in Ukraine led by President Vladimir Putin may have some investors hoping that a peace deal can be struck.

"I know (Ukraine President Volodymyr) Zelensky said he needs to speak to Putin directly to make a deal, so Ukraine is ready to make a deal and perhaps that's stalling the price of oil for now," he said in an interview.

The Canadian dollar typically follows movements in crude prices, but the loonie rose to its highest level since Jan. 21 despite the drop in oil. The Canadian dollar traded for 79.71 cents US compared with 79.55 cents US on Wednesday. 

Given the strength of oil and gold, Small said it's amazing that the loonie isn't even higher.

"That tells me that perhaps where our dollar has been in the low 80s at one point not too long ago could have been the top, at least the recent top, for the next little while," he said. "I'm on the side of seeing a weaker dollar sometime in the second half of this year, somewhere getting closer to that 75 to 77 cents range."

The materials sector was virtually flat on the day as the April gold contract gained US$24.90 at US$1,962.20 an ounce and the May copper contract was down 3.4 cents at US$4.74 a pound. 

The heavyweight technology sector pushed the U.S. stock market higher, helped by strong economic data with initial jobless claims falling last week to 187,000, the lowest level since 1969.

"There is no doubt that the underlying economy in the U.S. is strong and absolutely any time you get good economic data, that just solidifies the fact that the underlying demand for products and services out of the U.S. is strong," Small said.

But that also means the U.S. Federal Reserve will be aggressive in raising interest rates this year, something already anticipated by markets.

"I think where the market will be spooked is if we start to see slowing growth and the Fed raises rates because then they're raising rates into a slower economy and that will spell disaster for the stock market like it did in 2018."

This report by The Canadian Press was first published March 24, 2022. 


Ross Marowits, The Canadian Press