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S&P/TSX composite has best day of 2022 as energy, tech lead recovery

TORONTO — Strong corporate earnings south of the border lifted the tech sector and propelled Canada's main stock index to bounce back with its best performance of the year.
Canada's main stock index climbed higher in late-morning trading, boosted by gains in the consumer staples, telecommunications and health care sectors. Financial numbers flow on the digital ticker tape at the TMX Group in Toronto's financial district on May 9, 2014. THE CANADIAN PRESS/Darren Calabrese

TORONTO — Strong corporate earnings south of the border lifted the tech sector and propelled Canada's main stock index to bounce back with its best performance of the year. 

Facebook parent Meta Platforms beat expectations by posting a healthy profit after the bell Wednesday while Qualcomm and PayPal followed up with good earnings that drove the tech-heavy Nasdaq composite to climb 3.1 per cent. 

Canada's information technology sector also benefited, gaining 2.5 per cent led by an 8.7 per cent increase from Lightspeed Commerce Inc. and 6.5 per cent gain by Shopify Inc.

About 80 per cent of U.S. companies reporting first-quarter results so far have beat expectations. That offset potential disappointment from the first U.S. GDP decline since the start of the COVID-19 pandemic. The U.S. economy unexpectedly contracted 1.4 per cent in the first quarter from the same period a year ago.

Allan Small, senior investment adviser at IA Private Wealth, said the slide in economic growth might be positive if it prompts the Federal Reserve to consider how quickly it raises interest rates.

"We saw the market actually go higher on that print, but I think this is primarily the result of good earnings out of some megacaps in the U.S. markets and I think that's driving the bus today," he said in an interview. 

"When you have that, mixed in with oversold conditions, it's kind of the spark that ignites and we're seeing a pretty big rally led by the Nasdaq, which is the home for most of these tech stocks."

The S&P/TSX composite index closed up 376.83 points or 1.8 per cent to 21,121.06 for its best daily performance since December, partially offsetting recent losses.

In New York, the Dow Jones industrial average was up 614.46 points at 33,916.39. The S&P 500 index was up 103.54 points at 4,287.50, while the Nasdaq composite was up 382.60 points at 12,871.53.

Ten of the 11 major sectors on the TSX were higher on the day, with eight gaining at least one per cent. 

Helped by higher crude oil prices, the energy sector led, rising 5.1 per cent after Suncor Energy Inc. shares surged 12 per cent when one of North America's most aggressive activist investors said it was seeking an overhaul of the company's board and management team, along with the possible sale of Petro-Canada. 

Shares of Cenovus Energy Inc. increased another 6.7 per cent, on top of large gains Wednesday, after the Calgary producer tripled its dividend and reported a first-quarter profit of $1.6 billion. 

The June crude contract was up US$3.34 at US$105.36 per barrel and the June natural gas contract was down 45.1 cents at US$6.89 per mmBTU. 

Small said Russia's move to halt some natural gas exports to Poland and Bulgaria supported energy price increases and could spur European countries to find alternative suppliers like the U.S. and Canada to pick up the slack.

"Eventually I think the big country that will be hurt by all this will be Russia themselves because the rest of the world will figure out how to work around Russian oil and natural gas and if they do that, Russia's in big trouble."

The Canadian dollar traded for 77.95 cents US, unchanged from Wednesday. 

The heavyweight financials sectors increased 1.7 per cent in a relief rally with Toronto-Dominion Bank shares up 3.3 per cent.

Materials was also higher on an increase in bullion prices. The June gold contract was up US$2.60 at US$1,891.30 an ounce and the July copper contract was down 4.2 cents at US$4.43 a pound. 

The lone losing sector was telecommunications.

Small said the strength of the market rally will depend on after-market results from Apple and Amazon.

"If they report good earnings, it could set us up for a continuation of the rally tomorrow. If they disappoint we could see a selloff again and give back some of the gains we've seen today."

This report by The Canadian Press was first published April 28, 2022. 


Ross Marowits, The Canadian Press