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TSX reaches new record high as energy sector surges

A file photo from the TMX Broadcast Centre in downtown Toronto in 2013.

Fernando Morales/The Globe and Mail

Canada's key stock market index surged to a record intraday high on Friday, and is on track for a record-high close, as energy stocks rallied with stronger oil prices.

The S&P/TSX composite index rose as high as 15,938.68 near midday, up about 47 points, taking out a previous high in February.

The latest stock market gains continue a rally among Canadian stocks that began in early September, when financial stocks reflected better domestic economic activity and rising interest rates. But industrial stocks and technology stocks have also contributed to the gains over the past six weeks.

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Energy stocks were up 1.2 per cent on Friday, as the price of crude oil rose to $53.69 (US) a barrel, up $1.04, which is close to its high for the year.

Cameco Corp was an exception in the sector, tumbling 10.5 per cent to $10.17 after the uranium producer posted a surprised third-quarter loss and cut its full-year production outlook.

Canadian diary producer Saputo Inc provided one of the biggest boosts, rising 4.7 per cent to $47.03. It became Australia's top milk producer by agreeing to pay up to $490 million for Murray Goulburn Co-operative, its second major acquisition in the country.

The broader consumer staples group climbed 0.5 per cent.

the index's 10 main sectors, half were in positive territory.

The financials group added 0.2 per cent.

Nevsun Resources Ltd soared 8.8 per cent to $2.85 after reporting results and improved zinc production at its Bisha mine.

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But the overall materials sector, which includes precious and base metals miners and fertilizer companies, lost 0.3 per cent.

First Quantum Minerals Ltd stumbled 3.6 per cent to $13.96 after it posted a quarterly loss. Teck Resources Ltd shares extended losses, falling 2.5 per cent to $26.15 after analysts cut their target price following its results.

Winpak Ltd, which manufactures and distributes packaging materials and machines, plunged 10.2 per cent to $48.51 after third-quarter results fell short of forecasts.

Industrials were off 0.1 per cent as TFI International Inc slumped 6.3 per cent to $30.03.

Celestica Inc shares sank 11.5 per cent to $13.53 after it issued guidance and posted results that missed expectations. The technology group was down lost 0.4 percent.

Healthcare stocks lost 1.1 per cent.

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The Nasdaq Composite index surged more than 1 per cent on Friday on blowout earnings from Microsoft, Amazon and Alphabet and after Apple said demand for its latest iPhone X is "off the charts

Microsoft advanced 7.14 per cent after the world's largest software company reported further gains from its cloud computing services.

Amazon jumped 10.23 per cent and Google-parent Alphabet gained 5.62 per cent after results.

Apple rose 2.3 per cent.

The gains drove the S&P technology index up about 2.3 per cent. The sector has gained about 30 per cent this year, double the gains in the broader S&P index.

"In many ways, we're seeing the strong getting stronger," said Eric Wiegand, senior portfolio manager at the Private Client Reserve at U.S. Bank.

"While valuations are full, it certainly becomes imperative on them to deliver solid operating results and that's something that we did see."

Adding to the positive sentiment was the third-quarter GDP data that showed the U.S. economy unexpectedly maintained a brisk pace of growth, despite a hurricane-led drop in consumer spending and construction activities.

A report about President Donald Trump favoring Federal Reserve Governor Jerome Powell as the head of the U.S. central bank also supported the stocks.

In Powell's appointment, investors see a continuation of the current stock market-friendly monetary policy.

The Dow Jones Industrial Average was up 5.52 points, or 0.02 per cent, at 23,406.38, the S&P 500 was up 13.09 points, or 0.51 per cent, at 2,573.49 and the Nasdaq Composite was up 99.04 points, or 1.51 per cent, at 6,655.82.

Energy stocks weighed on the S&P and the Dow.

Chevron dipped 3.5 per cent after the oil giant's profit missed estimates as U.S. production slipped.

Merck slipped 4.42 per cent after the company reported a fall in revenue due to a cyber attack and loss of market share for many of its older drugs.

Mattel plunged 14 per cent after the toymaker said it would miss its full-year revenue forecast and stop dividend from the fourth quarter.

Expedia was slumped 17.8 per cent after the online travel services company's profit missed Wall Street's consensus forecast.

Shares of drug distributors tumbled on a report that Amazon gained wholesale pharmacy license in multiple states.

CVS Health, Walgreens Boots Alliance, Rite Aid fell between 7 per cent and 3.9 per cent.

Oil prices rose more 1 per cent on Friday on support among the world's top producers for extending a deal to cut output and as the dollar retreated from three-month peaks.

Brent rose 59 cents to $58.89 a barrel by 10:51 a.m. ET, after rising to a session high of $60.08, the highest since July 2015 and more than 35 percent above its 2017 lows touched in June.

U.S. light crude oil was up 78 cents, or 1.48 per cent at $53.42 after rising to a session high of $53.52 a barrel. U.S. crude prices have been capped by rising U.S. production.

Ahead of OPEC's next policy meeting, Saudi Arabia and Russia declared their support for extending a global deal to cut oil supplies for another nine months, OPEC's secretary general told Reuters on Friday. The pact runs to March 2018.

Saudi Arabia's Crown Prince Mohammad bin Salman told Reuters on Thursday the kingdom would support extending the output cut in a bid to stabilise oil demand and supply.

Oil prices have been hovering near their highest levels for this year amid recent signs of a tightening market, talk of an extension of production cuts and tensions in Iraq.

Friday's announcement of a ceasefire between Iraqi forces and the Peshmerga from the country's autonomous northern Kurdish region eased some concerns. "What is interesting is that the pop in WTI futures moved above the Sept. 28 high," said David Thompson, executive vice president at Powerhouse, an energy-specialized commodities broker in Washington, D.C.

"So even though the dollar is giving back some of its move, crude may now be trading off of a new driver, the technical breakthrough to a new high."

The dollar trimmed its earlier gains on Friday versus a basket of currencies following a Bloomberg report that U.S. President Donald Trump is said to be leaning toward Federal Reserve Governor Jerome Powell as his pick to head the U.S. central bank.

A weaker dollar makes greenback-denominated commodities including oil cheaper for holders of other currencies.

"I think the combination of short covering and Chevron and Exxon both missing their production guidance for the third quarter has resulted in the market strength today," said Scott Shelton, energy futures broker with ICAP in Durham, North Carolina.

TransCanada Corp said in a filing on Thursday that it is seeking to raise the temporary discounted spot rate for light crude on its 700,000 barrel-per-day Marketlink pipeline. The news sent U.S. crude benchmark's discount to global marker Brent to the widest in a month.

The Organization of the Petroleum Exporting Countries and some non-OPEC producers including Russia have pledged to reduce production by around 1.8 million barrels per day (bpd) until the end of March 2018 to drain a global supply glut.

"If OPEC and their non-OPEC partners can agree to extend their production curtailments through 2018, then we estimate the oil market will remain in modest under-supply until 2019," U.S. Investment bank Jefferies said.

OPEC is expected to discuss extending that agreement at a meeting in Vienna on Nov. 30.

Rising U.S. crude production remains an issue for OPEC as it strives to clear a global overhang.

With files from Reuters

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About the Author
Investing Reporter

David Berman has been writing about business and investing since 1995. He has written for a number of magazines, including Canadian Business and MoneySense. He worked at the Financial Post as an investing writer and daily columnist before moving to the Globe and Mail in 2008. More

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