The three major U.S. stock indexes rallied to record closing highs on Friday as financials and other economically focused sectors rebounded after a selloff sparked by growth worries earlier in the week.
The week also saw a sharp rally in U.S. Treasuries as investors worried the U.S. economic recovery might be losing steam with the Delta variant of the coronavirus spreading. That reversed course on Friday, with bond prices falling and their yields rising modestly.
The TSX rose nearly 1%, and despite having its worst day since February on Thursday, gained about 0.1% for the week. It ended the five days of trading only about 42 points away from its own record high close.
“What an about-face from all of the gloom and doom from yesterday,” said Jake Dollarhide, chief executive officer of Longbow Asset Management in Tulsa, Oklahoma.
Unofficially, the Dow Jones Industrial Average rose 446.29 points, or 1.3%, to 34,868.22, the S&P 500 gained 48.44 points, or 1.12%, to 4,369.26 and the Nasdaq Composite added 139.83 points, or 0.96%, to 14,699.61.
The S&P/TSX Composite Index Friday gained 196.74 points to 20,257.95. It was a broad rally, with financials gaining almost 1% and materials 1.59%.
MTY Food Group was the big mover of the day, surging 17.07% after reporting an impressive quarter that saw profits of $23-million, reversing from an almost $100-million loss a year earlier; it announced it will restart paying a dividend.
U.S. Treasury yields climbed on Friday, halting an eight-day price rally that was fueled in part by worries the economic recovery had already peaked and was showing signs of faltering amid a surge in coronavirus infections in many places around the globe.
The yield on 10-year Treasury notes was up 7 basis points to 1.358% after falling as low as 1.25% on Thursday, the lowest level since Feb. 16.
The eight days of declines for the 10-year yield marked the longest such streak since a nine-session drop that ended on March 3, 2020, as the COVID-19 pandemic in the United States was gaining speed. Also contributing to the drop in yields, analysts said, was recent volatility in the oil markets, a lack of supply with a dearth of longer-term government auctions this week and a market that was largely short.
Analysts said U.S. Treasury auctions next week could help with supply and send yields higher, with $38 billion of 10-year notes offered on Monday, followed by $24 billion of 30-year bonds on Tuesday.
Low vaccination rates in some regions of the world pose a threat to the United States and global growth, the Federal Reserve’s Mary Daly told the Financial Times, adding that the U.S. central bank was fully committed to eliminating shortfalls in employment.
Next week, the big U.S. banks will be among the first to report quarterly earnings, with the season kicking off next week. A big jump in quarterly earnings is expected to mark a peak for U.S. profit growth in the recovery from last year’s pandemic-induced collapse.
Analysts expect earnings growth of 65.8% for companies in the S&P 500 index in the quarter, up from a previous forecast of 54% growth at the start of the period, according to Refinitiv IBES data.
The Canadian dollar strengthened against its U.S. counterpart on Friday, clawing back some of this week’s decline, as domestic jobs data supported expectations for further reduction of the Bank of Canada’s asset purchase program.
Canada added 231,000 jobs in June, more than expected, bringing employment within 1.8% of pre-pandemic levels, as public health restrictions were eased in several regions of the country, Statistics Canada data showed.
“It looks encouraging,” said Amo Sahota, director at Klarity FX in San Francisco. “I think it’s going to confirm what’s widely anticipated next week. The Bank of Canada is going to adjust their tapering and reduce the amount of asset purchases.”
With Canadian vaccinations progressing at a rapid pace and provinces easing economic restrictions, the BoC is expected to cut bond purchases by C$1 billion to C$2 billion per week next Wednesday, a Reuters poll showed.
Still, the growing spread of the Delta coronavirus variant could cap the central bank’s optimism on the economic outlook, Sahota said.
Oil prices rose for a second day on Friday as the market reacted to falling U.S. inventories. Signs of strong Asian demand from both China and India also strengthened the market.
Oil futures in New York rose about 2%.
Reuters, Globe staff
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