Gains in the energy and mining sectors helped Canada's main stock index edge slightly higher on Monday against the backdrop of rising prices for commodities like oil, natural gas and gold.
During the first day of trading after the Easter long weekend, the S&P/TSX composite index closed up 22.71 points at 21,878.41 as investors turned to commodities in the face of Ukraine war fears and the ever-present threat posed by inflation.
Energy stocks were the big winners, with the S&P/TSX Capped Energy Index up 6.88 points or 2.89 per cent, while the S&P/TSX Capped Materials Index was up 3.19 points or 0.77 per cent.
The S&P/TSX Health Care Index lost the most in the day’s trading, falling 2.03 points or 5.08 per cent as investors turned away from riskier bets such as cannabis stocks.
Mona Mahajan, senior Investment Strategist at Edward Jones, said the market continues to react to the Bank of Canada’s second interest rate increase of 2022 (a 50 basis-point hike announced last week) as well as expectations of forthcoming rate hikes by the U.S. Federal Reserve.
“In fact, if you see what the market odds are, they’re predicting a 50 basis point rate hike in May, June, and July for the Federal Reserve, and I think at least one more 50 basis point hike by the Bank of Canada as well,” Mahajan said. “Generally I’d say this market is bracing itself for an aggressive central bank move.”
In New York, the Dow Jones industrial average was down 39.54 points at 34,411.69. The S&P 500 index was down 0.90 points at 4,391.69, while the Nasdaq composite was down 18.72 points at 13,332.36.
On a year-to-date basis, the TSX has outperformed U.S. markets, Mahajan said, largely because it is more heavily exposed to commodities stocks. On Monday, the June crude contract was up US$1.23 at US$107.61 per barrel and the May natural gas contract was up 52 cents US$7.82 per mmBTU.
The June gold contract was up US$11.50 at US$1,986.40 an ounce and the May copper contract was up eight cents at US$4.80 a pound.
“The TSX has been one of the few markets that is up year to date . . . I think the higher weighting in energy and materials has really helped that market,” Mahajan said.
She added it's interesting that concerns about rate hikes and their potential impact on the economy continue to weigh on markets, in spite of a wealth of other positive economic indicators recently.
"Whether it’s unemployment or consumer confidence or even earnings, both the U.S. and in Canada have come out pretty much in line or even slightly ahead of expectations," she said.
There will be plenty for Canadian investors to watch for in the week ahead, Mahajan added, with Statistics Canada expected to release the Consumer Price Index (CPI) figure for the month of March on Wednesday. CPI measures the change in the price of a fixed basket of consumer goods in Canada, and is considered a good measure of inflation. Some forecasts expect CPI in March to be up as much as 6.2 per cent year-over-year, Mahajan said.
This week, Statistics Canada is also expected to release its latest data on retail sales.
"That will be pretty telling in terms of what the health of the consumer is, which is of course pretty important for the health of the economy," Mahajan said. "So I think those two in particular this week we’ll be keeping an eye out on.”
The Canadian dollar traded for 79.25 cents US compared with 79.36 cents US on Thursday.
This report by The Canadian Press was first published April 18, 2022.
Companies in this story: (TSX:GSPTSE, TSX:CADUSD=X)
Amanda Stephenson, The Canadian Press
