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The close: TSX hits 14-week high, recoups summer losses in broad rally

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

Fernando Morales/The Globe and Mail

Canada's main stock index rallied to a 14-week high on Wednesday, propelled by energy and financial stocks, as well as a surge in Air Canada shares after investors cheered the airliner's outlook.

BlackBerry Ltd stock also leaped, adding 8.6 per cent to finish at C$12.15 after the company and auto supplier Delphi Automotive Plc announced they were partnering on a software system for self-driving cars. The overall technology group eked out a 0.1 per cent gain.

Energy stocks jumped 2.5 percent as the sector profited from higher oil prices after Iraq's oil minister suggested more output cuts were possible. Oil prices were on course for their largest third-quarter gain in 13 years, with the U.S. crude settling at $50.41 a barrel, up 1.9 per cent.

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Canadian Natural Resources rose 2.4 per cent to C$41.44, while Encana Corp advanced 4.5 per cent to C$13.69.

Financial services stocks, which make up an outsized third of the index's weight, gained 0.7 per cent, though individual bank stocks were mostly under 1 per cent.

The Toronto Stock Exchange's S&P/TSX composite index touched its highest level since June 12, ending up 96.63 points, or 0.63 per cent, to 15,389.60 with materials the index's only major group to lose ground.

The index has recouped its summer losses, rebounding 2.7 per cent since its trough 1-1/2 weeks ago.

"People have come to the conclusion that the Bank of Canada is not raising rates in October and that's probably also giving the TSX a little bit of a boost," said Sadiq Adatia, chief investment officer, at Sun Life Global Investments.

"I do think TSX will give back as the effects of the couple of interest rates that we've had this year start to get into the system."

Air Canada stocks soared 10.8 per cent to C$25.84 after several analysts raised their target prices and ratings on the airline following its update of its 2018 to 2020 financial goals. The broader industrials group rose 1.3 per cent.

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The materials group lost 0.6 per cent, with gold miners the index's biggest drags. Barrick Gold Corp was down 2 per cent at C$20.31, while Kinross Gold Corp gave up 3.6 per cent to end at C$5.35.

Advancing issues outnumbered declining ones on the TSX by 161 to 80, for a 2.01-to-1 ratio on the upside.

Eleven companies on the index posted a new 52-week highs, while two posted new lows.

Wall Street closes higher after Fed policy statement

The S&P 500 and the Dow ended slightly higher on Wednesday, adding to their string of closing records, after the Federal Reserve signaled it expects another interest rate hike by year-end and disclosed timing for reducing its balance sheet.

The Fed left rates unchanged for now, as was widely anticipated, but investors' expectations changed for December after the U.S. central bank signaled one more rate hike by year-end despite recent weak inflation readings.

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In line with expectations the Fed said it would begin in October to cut its roughly $4.2-trillion in U.S. Treasury bonds and mortgage-backed securities holdings by initially cutting up to $10-billion each month from the amount of maturing securities it reinvests.

Financial stocks jumped after the statement as U.S. Treasury yields rose on the prospect of higher rates while utilities took a fall on concerns that the defensive sector would look less attractive as rates climb.

While some investors said the Fed's tone was more hawkish than expected others were happy Fed Chair Janet Yellen reiterated her stance that balance sheet reduction would be data dependent.

"The most important thing Yellen needed to communicate to the market was that the bond sale plan and rate increases are not on autopilot," said Jason Pride, director of investment strategy at Glenmede in Philadelphia.

After the statement traders were betting on a roughly 67 per cent chance of a December hike, compared with 51 per cent minutes before, according to the CME Group's FedWatch tool.

"Keeping rate hikes where they were was expected. What wasn't known was the tone. The market reaction is interpreting the Fed as slightly hawkish but not too much," said Victor Jones, director of trading at TD Ameritrade in Chicago.

The Dow Jones Industrial Average rose 41.79 points, or 0.19 per cent to end at 22,412.59, its seventh straight record close.

The S&P 500 gained 1.59 points, or 0.06 per cent, to 2,508.24, clocking its sixth record closing high in the last seven sessions. The Nasdaq Composite dropped 5.28 points, or 0.08 per cent, to 6,456.04, with Apple Inc as its biggest drag.

The S&P's financial sector ended 0.6 per cent higher as banks benefit from higher rates. The sector has risen in eight of the last nine sessions and has clocked a 6.7 per cent gain in that time as investors anticipated the Fed meeting.

The consumer staples sector fell 0.9 per cent while the utilities sector ended 0.8 per cent lower.

Shares of Apple fell 1.7 per cent after it admitted its latest smartwatch has connectivity problems.

Advancing issues outnumbered declining ones on the NYSE by a 1.26-to-1 ratio; on Nasdaq, a 1.30-to-1 ratio favored advancers.

Roughly 6.7 billion shares changed hands on U.S. exchanges compared with the 6 billion average for the last 20 sessions.

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