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North American stock markets rally to pare early losses over inflation concerns

·3 min read

TORONTO — North American stock markets rallied to pare morning losses prompted by worries about rising inflation.

The S&P/TSX composite index closed down 87.84 points to 19,274.04 after dropping by as much as 272 points earlier Tuesday.

In New York, the Dow Jones industrial average was down 473.66 points at 34,269.16. The S&P 500 index was down 36.33 points at 4,152.10, while the Nasdaq composite was down 12.43 points at 13,389.43 after being down as much as 2.2 per cent.

"The day started like yesterday; a lot of worry about the inflation that could lead to an increase of interest rates," said Pierre Cléroux, chief economist for the Business Development Bank of Canada.

Rising commodity prices helped to prompt investors to worry about inflation but stock markets stabilized by the end of day.

"We started in a very negative zone this morning but as the day is going it's a bit more stable now," he said in an interview.

The technology sector stabilized a day after taking the brunt of the hit.

Cléroux said markets improved as people adjusted to Monday's steep declines.

"There's no new news today to make investors feel better. The situation is exactly the same as yesterday but I think the concern is a bit less today as time goes by."

Nine of the 11 major sectors on the TSX were down with only materials and health care rising.

Although gold prices slipped, the sector that includes mining, forestry and fertilizer companies, moved higher with Centerra Gold Inc. up 12.5 per cent and Domtar Inc. surging 17 per cent after announcing it was the target of a US$3-billion takeover deal.

The June gold contract was down US$1.50 at US$1,836.10 an ounce and the July copper contract was up 4.6 cents at US$4.76 a pound.

The consumer discretionary sector led the TSX lower as shares of Aritzia Inc. fell four per cent.

Energy lost 1.2 per cent despite an increase in crude oil prices, with Crescent Point Energy Corp., Canadian Natural Resources Ltd. and Suncor Energy Inc. down 2.7, 2.4 and two per cent, respectively.

The June crude oil contract was up 36 cents US$65.28 per barrel and the June natural gas contract was up 2.3 cents at almost US$2.96 per mmBTU.

Crude oil prices climbed on expectations of growing demand despite concerns about COVID-19 infections in India and the short-term impact of a cyberattack on Colonial Pipeline that services a large swath of the U.S. eastern seaboard.

The Canadian government also asked a U.S. court to stop the state of Michigan from shutting down an Enbridge Inc. pipeline that supplies fuel to several states as well as Ontario and Quebec.

"They are going to find a solution. This is too important for the Canadian industry so I'm sure that they are going to find a solution for that," Cléroux said.

The Canadian dollar traded for 82.67 cents US compared with 82.68 cents US on Monday.

Industrials, financials, real estate and utilities also decreased in a broad-based decline for the day.

"What I like is that the end of the day is improving, much improving for the Nasdaq and the TSX is actually also improving. I think tomorrow we are going to have a positive day."

This report by The Canadian Press was first published May 11, 2021.

Companies in this story: (TSX:CG, TSX:CPG, TSX:CNQ, TSX:SU, TSX:ENB, TSX:ATZ, TSX:GSPTSE, TSX:CADUSD=X)

Ross Marowits, The Canadian Press