TORONTO — Commodities and financials drove Canada's main stock index higher to start February after a volatile start to the year on anticipation that interest rates will rise next month.
The S&P/TSX composite index rose for a third straight day while U.S. markets were also higher on gains from cyclicals, value and commodities while technology and growth sectors lagged, said Craig Jerusalim, portfolio manager at CIBC Asset Management.
"That's always going to be good for Canada as the three pillars of the TSX are up handsomely," he said in an interview.
The S&P/TSX composite index closed up 221.63 points to 21,319.92.
In New York, the Dow Jones industrial average was up 273.38 points at 35,405.24. The S&P 500 index was up 30.99 points at 4,546.54, while the Nasdaq composite was up 106.12 points at 14,346.00.
Jerusalim said the strength corporate earnings are going to dictate the direction of U.S. markets.
"The path of least resistance is lower unless earnings can justify the move higher and we've seen some of the bellwethers like Apple and Microsoft exceed expectations and be rewarded accordingly," he said.
One-third of U.S. companies have reported fourth-quarter results and the trend has been positive overall.
"But really we're going to have to see a continuation of those earnings exceeding expectations for U.S. equity markets to to move higher from here."
The move toward cyclicals, value and commodity sectors definitely favours Canada over the medium and long-term, Jerusalim said.
"I would say that the TSX has an easier path to outperforming the U.S. this year given the starting valuation and the composition."
Energy and materials led the TSX on Tuesday.
Energy climbed 3.6 per cent even though crude oil prices rose slightly and natural gas prices dropped.
The March crude oil contract was up five cents at US$88.20 per barrel after reaching a high of US$88.87 and the March natural gas contract was down 12.3 cents at US$4.75 per mmBTU.
Energy companies are generating so much excess free cash flow that more money will be returned to shareholders, which will increase valuations, Jerusalim said.
Imperial Oil boosted its quarterly dividend 26 per cent after posting strong fourth-quarter results on Tuesday. Its shares climbed 5.4 per cent.
The Canadian dollar traded for 78.78 cents US compared with 78.62 cents US on Monday.
Materials increased 1.7 per cent as gold prices move higher. Osisko Mining Inc. increased eight per cent.
The April gold contract was up US$5.10 at US$1,801.50 an ounce and the March copper contract was up nearly 11 cents at US$4.43 a pound.
Nutrien Inc. shares climbed 4.5 per cent after the potash company indicated it was able to increase supply if sanctions are imposed on Russia following an incursion into Ukraine.
The heavyweight financials sector increased about one per cent with shares of Toronto-Dominion Bank up 1.7 per cent.
Air Canada shares increased 3.5 per cent to help industrials while Spin Master shares surged 12.7 per cent after posting strong quarterly results to help consumer discretionary.
Utilities and telecommunications and technology were the lone laggards on the day.
This report by The Canadian Press was first published Feb. 1, 2022.
Companies in this story: (TSX:AC, TSX:TOY, TSX:NTR, TSX:OSK, TSX:IMO, TSX:TD, TSX:GSPTSE, TSX:CADUSD=X)
Ross Marowits, The Canadian Press
