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North American stock markets increase while loonie hits nearly three-year high

·3 min read

TORONTO — North American stock markets rose midweek with U.S. indexes setting record highs, while the loonie reached its highest value in nearly three years .

"The underlining mood in the markets today is largely one of optimism and improved appetite for risk, with investors bracing for additional U.S. stimulus that will ultimately revive growth and corporate earnings prospects," said Candice Bangsund, portfolio manager for Fiera Capital.

The S&P/TSX composite index closed up 57.54 points to 18,014.91. It hit an intraday high of 18,027.52 that's 31 points below its recent peak.

In New York, U.S. markets had record closes after setting intraday highs in early trading.

The Dow Jones industrial average was up 257.86 points at 31,188.38. The S&P 500 index was up 52.94 points at 3,851.85, while the Nasdaq composite was up 260.07 points or two per cent at 13,457.25.

The gains came as Joe Biden was sworn in as U.S. president.

He's proposed a US$1.9-trillion stimulus package that is likely to win Congressional support thanks to Democratic control of both houses.

Treasury Secretary nominee Janet Yellen endorsed the proposal in Tuesday confirmation hearings, raising the spectre of its passage. She also suggested that corporate taxes won't increase, at least until the economic is on more solid ground, Bangsund said.

Massive additional spending in the U.S. has positive implications not only for the American GDP but also global growth in the coming year.

She said COVID-19 vaccines are helping investors to largely look past the near-term risks associated with the virus, including the new strain that the Centers for Disease Control and Prevention warned on Friday will become the dominant strain in the U.S. and likely Canada in March.

"Beyond the near-term, the outlook is for stronger and above trend growth, ample liquidity conditions, fiscal support. This is setting the stage for a great year for equity investors," she said in an interview.

Also supporting the optimism are better-than-expected fourth-quarter earnings, with Netflix shares surging nearly 17 per cent after beating revenue expectations. It ended last year with more than 200 million subscribers.

Real estate, materials and technology moved the TSX higher, offsetting losses by financials, energy, health care and industrials.

A weaker U.S. dollar helped materials, which gained 1.4 per cent on higher gold and copper prices. Shares of First Majestic Silver Corp. rose 9.3 per cent.

The February gold contract was up US$26.30 at US$1,866.50 an ounce and the March copper contract was up less than a penny at US$3.64 a pound.

Another 2.9 per cent increase in BlackBerry shares helped technology.

The Canadian dollar traded for 79.01 cents US compared with 78.52 cents US on Tuesday. It reached 79.33 cents in earlier trading, the highest level since April 2018.

The loonie rose after the Bank of Canada kept its interest rate target on hold at 0.25 per cent, citing economic conditions and ongoing uncertainty from the pandemic.

Bangsund described the central bank's assessment as "fairly constructive medium-term."

Health care was dragged down 1.8 per cent by Aphria Inc. falling 4.6 per cent and Aurora Cannabis Inc. 3.3 per cent.

Energy dipped slightly despite the March crude oil contract increasing 33 cents at US$53.31 per barrel and the February natural gas contract was down 0.7 of a cent at US$2.54 per mmBTU.

This report by The Canadian Press was first published Jan. 20, 2021.

Companies in this story: (TSX:FR, TSX:APHA, TSX:ACB, TSX:BB, TSX:GSPTSE, TSX:CADUSD=X)

Ross Marowits, The Canadian Press