Canadian stocks soar to new heights as TSX surges to record close

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Canada's key stock market index surged to a record-high close Friday, joining a global rally in stocks eight-and-a-half years into the bull market.

The gains came as energy stocks rose alongside oil prices, and as investors bet the Bank of Canada will be less aggressive in raising interest rates than previously anticipated.

The Toronto Stock Exchange's S&P/TSX composite index closed up 61.88 points, or 0.39 per cent, at 15,953.51, edging above a previous record close of 15,922.37 reached in February.

The latest stock market gains continue a rally among Canadian stocks that started in early September, when bank stocks began to reflect better domestic economic activity and rising interest rates, which boost profits on loans.

But industrial stocks, technology and even struggling energy stocks have also contributed to the gains over the past six weeks. On Friday, four of the index's 10 indexes were higher, led by energy, consumer staples, utilities and financials.

Energy stocks roared higher Friday, up 2.6 per cent, as the price of crude oil rose as high as $53.98 (U.S.) , which is close to its high for the year. The gains follow efforts by OPEC to extend production cuts to the end of 2018. Oil is up 4.7 per cent this week.

Precision Drilling gained nearly 10 per cent, Saputo rose 6 per cent and Shopify was up 2.8 per cent.

The Canadian benchmark index's record high follows an extraordinary rally in global stocks – U.S., European and Japanese stocks have delivered double-digit gains in 2017 – even as some observers grow concerned about the age of the bull market and valuations.

Among U.S. stocks, the 30-stock Dow Jones industrial is up 18.6 per cent this year. The S&P 500 has risen 15.1 per cent, hitting numerous record highs since July, including another one on Friday.

Wall Street also climbed on Friday, as a surge in the tech sector and a rally in Amazon shares helped push the Nasdaq to its best day in nearly a year.

The Dow Jones Industrial Average rose 31.92 points, or 0.14 per cent, to 23,432.78, the S&P 500 gained 20.66 points, or 0.81 per cent, to 2,581.06 and the Nasdaq Composite added 144.49 points, or 2.2 per cent, to 6,701.26.

"We have seen six weekly record closings in a row for the S&P 500; seven monthly record closings in a row seven in a row on a daily basis as well," David Rosenberg, chief economist and strategist at Gluskin Sheff + Associates, in a note this week. "This has never happened before."

The U.S. gains follow upbeat economic news, the latest being a stronger-than-expected reading on third quarter economic activity. Gross domestic product rose 3 per cent, at an annualized pace, which was well above the 2.6 per cent growth that economists had been expecting and continues a winning streak for the economy.

Earlier this month, the U.S. Labor department reported that the country's unemployment rate in September fell to a 16-year low of 4.2 per cent.

In Canada, the stock market's 4.4-per-cent gain for the year has been far more muted than gains recorded by many other global indexes.

Nonetheless, the new high suggests that the Canadian market has shaken off concerns about the domestic economy, the housing market and commodity prices that had weighed on it mid-year.

Since Sept. 8, the S&P/TSX composite index has risen more than 6 per cent – adding 970 points to the index's total. Financials have risen 10 per cent over this period, with Royal Bank of Canada, Toronto-Dominion Bank, Bank of Nova Scotia and Bank of Montreal contributing 340 points, or about a third of the gains.

Industrials have risen 9.5 per cent, with big contributions from the railways, and technology stocks have risen 8.5 per cent.

However, materials have lagged, slumping 1.1 per cent over this period. The price of gold has declined with the improving outlook for the global economy and an outlook for higher inflation. Utilities have also struggled, with a gain of just 0.7 per cent, as reflecting some sensitivity to rising interest rates.

In New York, the S&P technology index led the way higher, up 2.91 per cent. The index notched its best day since March 1, 2016 and is up nearly 35 per cent on the year versus the 15-per-cent gain in the S&P 500.

Google-parent Alphabet gained 4.26 per cent as its revenue got a boost from advertising sales. Microsoft jumped 6.41 per cent after the world's largest software company reported further gains from its cloud computing services.

Also lifting the sector were shares of Apple, which rose 3.58 per cent after the company allayed concerns of muted demand for its 10th anniversary phone. Intel soared 7.38 per cent after its quarterly results topped estimates and the chipmaker raised its full-year forecasts.

Amazon, up 13.22 per cent, was responsible for the biggest boost to the S&P 500 after reporting a quarterly sales surge. Its gains helped lift the consumer discretionary sector 1.60 per cent to its best daily performance since Dec. 7.

"Anyone who is drawing parallels to the tech bubble of 1999 has to at least consider that this rally in those large names is really fueled in large part by earnings, not just hope," said Jack Ablin, chief investment officer at BMO Private Bank in Chicago.

"They are the ones that everyone wants to own, has to own because they are the ones reporting the best earnings. They definitely came through, that is very positive."

"There are certainly similarities between the tech bubble and now, but the underpinnings of this rally are still a lot more solid."

with files from Reuters