North American markets recover on corporate earnings and ease geopolitical tensions

CALGARY-

North American markets rose on Wednesday against the backdrop of another day of strong corporate earnings, as well as an easing of investor anxiety over US-China relations.

The S&P/TSX Composite Index closed 40.61 points higher at 19,545.94.

In New York, the Dow Jones Industrial Average rose 416.33 points to 32,810.50. The S&P 500 index closed up 63.98 points at 4,155.17, while the Nasdaq Composite closed up 319.40 points at 12,668.16.

The gains followed a risky trading day on Tuesday, when both Canada’s main stock index and US markets closed in the red. Tuesday’s losses were attributed, at least in part, to the highly publicized visit to Taiwan by US House Speaker Nancy Pelosi, which heightened US tensions with China and led to Some investors worry about possible international business implications.

Pelosi had left Taiwan on Wednesday and the lack of immediate fallout from Beijing seemed to be easing investor fears. However, Greg Taylor, chief investment officer at Purpose Investments, said Wednesday’s market rally, particularly in the US tech sector, was strong enough to be attributed solely to the Pelosi situation.

“There was some expectation that the markets would rally today,” Taylor said.

“But it was a little more than most people expected, and I think a lot of people are scratching their heads about what caused this buying appetite today.”

One factor behind the unexpected rebound could be another encouraging batch of earnings from some of the biggest companies south of the border.

US drugstore chain CVS rose 6.3 percent after reporting strong financial results and raising its profit forecast for the year. Starbucks rose 4.3 percent after also reporting strong financial results.

Nearly three-quarters of companies within the benchmark S&P 500 index reported earnings for the latest quarter, with results mostly beating analyst forecasts.

“Going into the last few weeks, the markets were really concerned that this earnings season was going to be uglier than it has been,” Taylor said.

“But we’re almost 70 percent through this US earnings season now, and it hasn’t been perfect, but it didn’t need to be perfect. In fact, it’s been a little better than anyone feared, and I think that’s brought a little bit of relief.”

In Canada, health care, technology and financials won the day, while mining stocks and, in particular, energy stocks suffered losses. While West Texas International’s benchmark crude price fell almost 4 percent on Tuesday to close at $90.91, the S&P/TSX Limited Energy Index lost 4.22 percent.

Several Canadian energy companies, including Paramount Resources Ltd., MEG Energy Corp. and Athabasca Oil Corp., lost between eight and 10 percent of their share price value on Tuesday.

Taylor said the drop in oil prices was largely due to new inventory data from the US Energy Information Administration, which showed an unexpected rise in crude oil inventories and a possible decline in production. demand.

“This is also a soft time for oil prices in general. It’s getting late in the summer and the driving season is almost over,” Taylor said.

He added that while crude oil has declined significantly in recent weeks, with no end in sight to the Russian-Ukrainian war, there will still be a lot of uncertainty related to energy demand heading into the fall and winter.

“There really isn’t a lot of new supply that can come out. . . so it’s hard to see oil going back materially,” he said, adding that Canadian energy companies remain very profitable at current oil prices.

“I think as long as oil can stay in that $75 to $80 range. . . probably gearing up for a decent second half of the year.”

Later this week, investors will be keeping an eye on US and Canadian payroll data expected on Friday. Taylor said weaker-than-expected payroll data could actually be good news for markets, as it could convince central banks to take a breather from a string of recent interest rate hikes.

Investors will also be keeping an eye on US inflation data due next week.

“That will give more insight into whether we’re getting a little closer to this spike in inflation than everyone expects us to be,” he said.

The Canadian dollar traded at 77.80 US cents compared to 77.78 US cents on Tuesday.

The September crude contract was down $3.76 at $90.66 a barrel and the September natural gas contract was up 56 cents at $8.27.

The October gold contract was down $13.30 at $1,776.40 an ounce and the September copper contract was down five cents at $3.47 a pound.

This report from The Canadian Press was first published on August 3, 2022.

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