TORONTO — North American stock markets climbed Tuesday as signs of a faster economic recovery and a promising potential treatment for COVID-19 offset lingering concerns about a second wave of infections.
Markets got an early push after U.S. retail sales increased by a record 17.7 per cent in May from April, well above the 7.7 per cent gain forecast by economists. That follows a stronger jobs report.
"It's a strong bounce back and it would be more support for the potential for a stronger recovery than what investors and economists had been planning for," said Anish Chopra, managing director with Portfolio Management Corp.
Investors were also buoyed by reports that the U.S. administration is preparing a US$1-trillion infrastructure package and results from a British-led trial that the use of the generic steroid drug dexamethasone reduced death rates for hospitalized virus patients by around a third.
Markets were volatile, bouncing around with interpretations of Federal Reserve chairman Jerome Powell's testimony before a U.S. senate committee warning that the U.S. faces an uneven and prolonged recovery from the novel coronavirus crisis.
Investors were initially concerned that Powell's "more sobering comments" that the Fed didn't want to "run through the bond market like an elephant" signalled that he would turn down the spending taps.
But they gained some comfort as he said he wanted market conditions to dictate the pace of bond purchases, while also preserving the gains already made from central bank actions.
"He wanted to keep the level of confidence up and so I think, as opposed to taking one comment, if you read the entirety of his comments, they're generally positive for the markets," Chopra said in an interview.
The S&P/TSX composite index closed up 156.17 points at 15,515.82 on a day that saw a 250-point swing between the high and low.
In New York, the Dow Jones industrial average was up 526.82 points or two per cent at 26,289.98. The S&P 500 index was up 58.15 points at 3,124.74, while the Nasdaq composite was up 169.84 points at 9,895.87.
The TSX was helped by the energy sector, which gained 1.9 per cent as crude oil prices rose on improved hope for global demand after The International Energy Agency increased its forecast for 2020.
Shares of Secure Energy Services Inc. were up 6.4 per cent, while Cenovus Energy Inc. rose 5.6 per cent.
The July crude contract was up US$1.26 at US$38.38 per barrel and the July natural gas contract was down 5.5 cents at US$1.61 per mmBTU.
The Canadian dollar traded for 73.76 cents US compared with 73.51 cents US on Monday.
In addition to the improved demand outlook, oil prices were helped by about 89 per cent compliance with production cuts by OPEC and Russia.
"There's still a long way back in terms of when you look at total oil usage when you look at jet fuel, but once again, things are moving in the right direction and at a reasonable pace," said Chopra.
Ten of the 11 major sectors of the TSX were higher, led by health care, financials and industrials.
Health care gained 4.45 per cent as Bausch Health Companies Inc. surged 8.8 per cent. The heavyweight financials sector rose 1.6 per cent as Fairfax Financial Holdings Ltd. gained 8.6 per cent after chairman Prem Watsa announced he spent about $150 million purchasing more company shares.
The lone laggard on the day was materials, which lost 1.6 per cent despite higher gold prices.
The August gold contract was up US$9.30 at US$1,736.50 an ounce and the July copper contract was down two tenths of a cent at US$2.56 a pound.
Chopra said investors seemed to be reacting more to the day-to-day news on Tuesday with concern about a second wave of infections not being as important.
That's despite infections rising in some U.S. states and China closing schools in Beijing because of a second wave of cases.
"That should be looming over the markets, but it's just not the primary item that investors are thinking about today, investors are more looking at the economic data that's come in."
This report by The Canadian Press was first published June 16, 2020.
Companies in this story: (TSX:FFH, TSX:SES, TSX:CVE, TSXBHC, TSX:GSPTSE, TSX:CADUSD=X)
Ross Marowits, The Canadian Press