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North American stock markets rebound from steep losses on promised stimulus

TORONTO — North American stock markets partially recovered from Monday's steep losses on co-ordinated actions by central banks and plans for a US$1 trillion stimulus package by the U.S. government.

The S&P/TSX composite index closed up 324.81 points or 2.6 per cent at 12,685.21, a day after shedding almost 10 per cent or 1,355.93 points. 

In New York, the Dow Jones industrial average gained 1,048.86 points at 21,237.38, after losing almost 3,000 points in its worst day since Black Monday in 1987.

The S&P 500 index was up 143.06 points at 2,529.19, while the Nasdaq composite was up 430.19 points, or 6.2 per cent, at 7,334.78.

Tuesday's stock market movements continued the large daily swings in reaction to the latest news related to the novel coronavirus.

Governments have joined central banks in responding to the challenge but it takes them a bit longer to act, said Anish Chopra, managing director with Portfolio Management Corp.

About one quarter of the U.S. government's package is expected to include direct help to people.

"The rumours are that the cheques will be mailed out quite quickly so I think that really helps the U.S. economy," he said.

Chopra said investors are better able to assess the economic and human toll from COVID-19. However, the U.S. and Canada are at the early stages of trying to control the virus's spread.

Markets also recovered from the worst day in decades amid the U.S. Federal Reserve's latest emergency action. The central bank is establishing a lending facility to buy short-term loans from banks and companies to ease the flow of credit as the economy grinds to a halt from the viral outbreak.

The Fed announced Tuesday that it's reviving a program it first used during the 2008 financial crisis to unclog a short-term lending market for what is known as "commercial paper." Large businesses issue commercial paper to raise cash to meet payrolls and cover other short-term costs.

Materials was the strongest sector, rising more than nine per cent as gold prices returned to exceed the US$1,500 per ounce level. That pushed SilverCorp Metals Inc. up 41 per cent, followed by Alamos Gold Inc. up 31 per cent.

The April gold contract was up US$39.30 at US$1,525.80 an ounce and the May copper contract was down 7.9 cents at US$2.31 a pound.

Industrials moved higher even though Chorus Aviation Holdings fell 24 per cent and Air Canada lost another 11.7 per cent as Canadian Pacific Railway was up 6.4 per cent.

Consumer staples was helped by Maple Leaf Foods gaining 8.3 per cent and Loblaw Companies Ltd. climbing eight per cent as grocers benefit from consumers stocking up on essentials.

The key energy sector continued to lose ground, falling 9.2 per cent as crude oil prices slipped and sent gasoline prices in Canada to lows not seen in years.

The April crude contract was down US$1.75 at US$26.95 per barrel and the April natural gas contract was down 8.6 cents at US$1.73 per mmBTU. Shares of Cenovus Energy sank more than 20 per cent.

Oil prices are falling on waning demand as countries close down large parts of their economy to contain the spread of coronavirus, and increased supply from a price war between Saudi Arabia and Russia.

"Demand is falling as we see these quarantines happen worldwide," said Chopra. "At the same time you have more oil getting put onto the market so you have more supply coming on just when you don't need it."

The Canadian dollar was down as investors continued to turn to the safety of the U.S. greenback as it traded for 70.55 cents US compared with an average of 71.61 cents US on Monday.

This report by The Canadian Press was first published March 17, 2020.

Companies in this story: (TSX:CVE, TSX:CP, TSX:CHR, TSX:AC, TSX:MFI, TSX:L, TSX:SVM, TSX:AGI, TSX:GSPTSE, TSX:CADUSD=X)

— With files from The Associated Press.

Ross Marowits, The Canadian Press