Canada’s main stock index rose for the eighth-straight session Thursday, closing at an-time high for the first time since January and marking a surprisingly fast recovery from its plunge into correction territory only six weeks earlier.
The bounceback from the S&P/TSX Composite’s lows in April has been broadly based, led by strength in technology and financial sectors. On Thursday, industrials - a sector that is particularly sensitive to the economy - led gainers, further signaling a reluctance among investors to believe a punishing recession is inevitable amid the ongoing trade and tariff tensions with the U.S.
Stocks globally have been rallying in recent weeks, and the S&P 500 also gained Thursday. It remains about 4% below its record high close on Feb. 19.
A series of investment deals from the Middle East during U.S. President Donald Trump’s ongoing Gulf tour, along with earlier positive news on the U.S.-China tariff dispute and cooler U.S. inflation data, is influencing market sentiment.
“The TSX hitting an all-time high is a reminder that markets often look past today’s headlines and price in tomorrow’s potential,” said Stan Wong, portfolio manager and senior wealth adviser with Scotia Wealth Management. “A key tailwind has been the de-escalation in global trade tensions, which has helped lift sentiment and reduced some of the risk discount weighing on Canadian equities.”
Craig Jerusalim, a senior portfolio manager at CIBC Asset Management, said that valuations remain attractive even after the rally of the past six weeks.
The S&P/TSX Composite Index is trading at about 14.5 times estimated earnings for the next year, only modestly above the long-term average of 14 times. Meanwhile, this past earnings season saw earnings per share growth of about 22 per cent in Canada and 12 per cent for the U.S., he said.
“There is nothing worrying about equity markets being at all-time record highs, especially when valuations are reasonable and earnings growth is robust,” he said. “This past earnings season saw extremely strong earnings per share growth, which likely benefited from a tariff induced pull-forward of demand. However, now with the temporary reprieve given to many of the U.S.’s trading partners, depressed negative sentiment indicators have started to recover, which could lead to spending remaining robust.”
David Rosenberg, founder of Rosenberg Research, cautioned against interpreting the record-breaking TSX run as being a made-in-Canada event.
“The local market is simply getting caught up in the vortex of the global risk-on momentum in the aftermath of all the head-spinning Trump tariff reversals since Liberation Day — a day that liberated us from economic sanity,“ he told the Globe in an email.
Rosenberg believes a recession in Canada is actually still unfolding, despite the rally in equities that would seem to suggest otherwise. “Ergo, a market driven by sentiment and headlines as opposed to one being influenced by economic fundamentals,” he said.
The TSX ended up 205.03 points, or 0.8%, at 25,897.48, eclipsing the record closing high it posted on Jan. 30. It also set a record intraday peak. The index fell into a correction - a decline of more than 10% from recent highs - in early April after Trump announced his so-called Liberation day tariffs.
The industrials sector rose 1.8%, led by a gain of 10.9% for the shares of AtkinsRealis Group Inc after the engineering services firm reported first-quarter profit and revenue above estimates.
Heavily weighted financials added 1%, while the materials group, which includes metal mining shares, was up 1.3% as gold rallied.
Energy was the only one of 10 major sectors to lose ground. It fell 1.3% as the price of oil settled 2.4% lower at US$61.62 a barrel on expectations for a U.S.-Iran nuclear deal.
Meanwhile, the S&P 500 has more than recovered from a deep selloff in April triggered by Trump’s global trade war.
“People think there are going to be deals, so they are just getting ahead of that, and they don’t want to be short stocks. ‘Deal anticipation’ is what I’d call it,” said Dennis Dick, a trader at Triple D Trading.
In individual U.S. stocks, Cisco Systems jumped almost 5% after the networking company raised its annual forecast, driven by the artificial intelligence boom.
UnitedHealth Group plunged 11% to a five-year low after the Wall Street Journal reported the U.S. Department of Justice was conducting a criminal investigation into the company for possible Medicare fraud. UnitedHealth said it had not been informed of a criminal probe by federal prosecutors.
Walmart eased 0.5% after the heavyweight retailer warned it would start raising prices later this month due to tariffs, even after its first-quarter U.S. comparable sales beat expectations.
Rival retailer Amazon, also heavily exposed to Trump’s tariffs, dropped 2.4% and weighed on the Nasdaq.
Walmart declined to provide a second-quarter profit outlook, joining other companies across sectors that have tweaked or pulled their forecasts, signaling that corporate America is hunkering down due to tariff-related uncertainty.
The S&P 500 climbed 0.41% to end at 5,916.93 points.
The Nasdaq declined 0.18% to 19,112.32 points, while the Dow Jones Industrial Average rose 0.65% to 42,322.75 points.
Of the 11 S&P 500 sector indexes, eight rose, led by utilities, up 2.1%, followed by a 2% gain in consumer staples.
Data Thursday showed U.S. retail sales growth slowed in April, while a separate report showed producer prices unexpectedly fell last month. That followed a relatively tame consumer price reading earlier in the week.
“We’re still waiting for that inflation pop. It’s not here yet, but we’re still waiting,” said John Augustine, chief investment officer of Huntington National Bank.
Advancing issues outnumbered falling ones within the S&P 500 by a 2.9-to-one ratio.The S&P 500 posted 15 new highs and six new lows; the Nasdaq recorded 51 new highs and 107 new lows. Volume on U.S. exchanges was relatively heavy, with 17.9 billion shares traded, compared to an average of 16.8 billion shares over the previous 20 sessions.
With reports from Reuters