TORONTO — Canada's main stock index closed lower Friday but still posted its sixth consecutive weekly gain on anticipation that vaccines will drive a rebound in the months to come.
The market has run up almost 13 per cent since Halloween because of positive vaccine news that suggests things will be incrementally better 12 months out, says Philip Petursson, chief investment strategist at Manulife Investment Management.
"As the vaccine and other vaccines become more available and more people become vaccinated and the economy starts to open up, unemployment starts to fall and we start to unlock that massive amount of savings that's been accumulated through COVID, things look quite strong for 2021," he said in an interview.
The S&P/TSX composite index closed down 44.42 points to 17,548.92. It was up about 28 points on the week, yet it has been rising since the beginning of November to almost a record high.
The increase has mirrored the movement of crude oil prices, which have also risen for six straight weeks and are up 30 per cent or nearly US$11 per barrel.
On Friday, the energy sector rose slightly with Whitecap Resources Inc. up 5.6 per cent despite lower crude prices.
The January crude contract was down 21 cents at $46.57 per barrel and the January natural gas contract was up 3.3 cents at about $2.60 per mmBTU.
Petursson noticed the day was marked by profit-taking and a rotation to more defensive sectors, like consumer staples, communications and utilities, which were all up on the day.
"I wouldn't say that this is a sign of exhaustion of the rally. I think, if anything, it's just more of a pause," he said.
"I continue to believe that December is going to end up positive and then in the first quarter, we'll have to deal with the realities of 2021."
A majority of the 11 major sectors on the TSX were lower, led by health care and consumer discretionary.
Materials fell even as gold prices rose on the growing acceptance of higher inflation next year, he said.
The February gold contract was up US$6.20 at US$1,843.60 an ounce and the March copper contract was down 4.8 cents US at nearly $3.53 a pound.
U.S. stock markets were more muted and dipped in the past week but were overshadowed by a few initial public offerings, like DoorDash Inc.'s and Airbnb Inc.'s, which caused some frenzy.
The Dow Jones industrial average was up 47.11 points at 30,046.37 on the back of a 13.6 per cent gain by Disney shares. The S&P 500 index was down 4.64 points at 3,663.46, while the Nasdaq composite was down 27.94 points at 12,377.87.
Uncertain stimulus negotiations in the U.S. have worried investors with many Americans about to lose unemployment benefits while COVID-19 infections, deaths and lockdowns continue to rise as the benefits of vaccines won't be seen for months.
"It's a little bit of reality setting into the markets," said Petursson.
The Canadian dollar traded for 78.31 cents US compared with 78.53 cents US on Thursday.
It has gained 3.2 cents or 4.3 per cent since the end of October on a weaker U.S. dollar and run-up in crude prices.
Petursson sees the loonie rising even further.
"We got through 78 cents fairly quickly. I think we can get through 79 fairly quickly as well."
This report by The Canadian Press was first published Dec. 11, 2020.
Companies in this story: (TSX:WCP, TSX:GSPTSE, TSX:CADUSD=X)
Ross Marowits, The Canadian Press