TORONTO — North American stock markets set new records to start the week as they climbed for a sixth-straight session on a broad-based rally led by commodities.
The party is continuing as momentum has driven the S&P 500 to its longest streak since August and the TSX matched its streak from early December.
The S&P/TSX composite index gained 194.36 points to a record close of 18,330.26 after hitting an intraday high of 18,333.83.
The composition of the Toronto stock market allowed it to outpace its U.S. counterparts.
In New York, the Dow Jones industrial average was up 237.52 points at 31,385.76. The S&P 500 index was up 28.76 points at 3,915.59, while the Nasdaq composite was up 131.34 points at 13,987.64.
"The cyclical exposure that the TSX has had for a long time ... is proving to be a benefit this year as the economy and investors are looking ahead to a world where we come closer to back to normal," said Angelo Kourkafas, investment strategist at Edward Jones.
An expected acceleration of inflation will lead to a pickup of growth in economically sensitive sectors that favours the TSX.
Optimism is being driven by expected fiscal stimulus from the U.S. government, an improving COVID-19 picture in the U.S. and a return to earnings growth.
Democrats are expected to pass a large relief package that might come in at a price tag less than the proposed US$1.9 trillion to keep moderates onside.
That move got a further lift over the weekend after Treasury Secretary Janet Yellen said the U.S. can return to full employment in 2022 with another sizable relief package.
"We think probably we're going to see a more modest package than the one initially proposed, but still, we think something more is coming," Kourkafas said in an interview.
"Another sizable U.S. package would further support Canadian export growth, commodity prices — which we are seeing the benefit of now — and investment activity."
A meaningful improvement in COVID-19 cases and hospitalizations over the last couple of weeks is also an encouraging trend, while U.S. vaccinations have increased to about 1.4 million per day to a total of 40.7 million.
While it's still early in the vaccine rollout, the improvements are reducing pressure on hospitals and boosting sentiment, he said.
Fourth-quarter earnings are also a positive driver. With about 60 per cent of companies reporting, the S&P is on track for a blended earnings growth of about two per cent, up from a forecasted nine per cent decrease in early January.
"It looks like it's going to be the first year-over-year positive sign on the earnings-growth front since Q4 of 2019," he said.
Health care, energy, materials and technology led a broad-based rally involving 10 of the 11 sectors on the TSX.
Health care gained 5.6 per cent as shares of cannabis producers Aurora Cannabis Inc. climbed 15.8 per cent and Aphria Inc. was up 13.5 per cent.
Energy rose two per cent as crude oil prices reached their highest level in more than a year on the optimism that the global economic recovery will accelerate as the year progresses amid a spread of vaccinations.
The March crude contract was up US$1.12 at US$57.97 per barrel after reaching a high of US$58.14. The March natural gas contract was up 1.9 cents at US$2.88 per mmBTU.
Shares of Arc Resources Ltd. and Enerplus Corp. were each up 6.5 per cent.
The Canadian dollar traded for 78.41 cents US compared with 78.28 cents US on Friday.
Materials increased 1.8 per cent as higher gold prices helped to push Teck Resources Ltd. up 5.6 per cent and Ivanhoe Mines Ltd. 4.6 per cent.
The April gold contract was up US$21.20 at US$1,834.20 an ounce and the March copper contract was up four cents at nearly US$3.67 a pound.
Gold is being pushed up because market expectations for increased inflation are at the highest point since 2014 as the global economy has been helped by massive fiscal and monetary stimulus, said Kourkafas.
He said momentum should accelerate in the second quarter.
"What we advise clients to do is keep realistic expectations about volatility and returns, but it's tough to be too negative in this environment."
This report by The Canadian Press was first published Feb. 8, 2021.
Companies in this story: (TSX:TECK.B, TSX:IVN, TX:ARX, TSX:ERF, TSX:ACB, TSX:APHA, TSX:GSPTSE, TSX:CADUSD=X)
Ross Marowits, The Canadian Press
