Energy sector pushes TSX higher despite big drop in price of crude oil

TORONTO — Canada's main stock index moved higher on gains by the key energy sector even though the price of crude oil dropped to its lowest level since 2002.

"The reaction in the stock market is consistent with what I would call a deep breath that we're seeing in the financial markets at the moment after the huge down draft that occurred from mid-February until mid-March," said Craig Fehr, Investment Strategist, Edward Jones.

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He said the see-saw pattern from day to day reflects investors trying to price-in a range of outcomes for the economy and markets.

"I think this is all part of the normal process that markets tend to go through when we see selloffs, in particular when we see bear markets," he said in an interview.

The S&P/TSX composite index was up 350.76 points or 2.8 per cent at 13,038.50.

In New York, the Dow Jones industrial average was up 690.70 points at 22,327.48. The S&P 500 index was up 85.18 points at 2,626,65, while the Nasdaq composite was up 271.77 points at 7,774.15.

Energy was the big mover as the sector gained nearly 12 per cent with shares of MEG Energy Corp. and Canadian Natural Resources up 22 and 18 per cent respectively.

The sector climbed even though weaker demand resulting from COVID-19 and a price war between Russia and Saudi Arabia caused oil prices to falter, dipping at one point below US$20 a barrel.

The May crude contract was down US$1.40 at US$20.09 per barrel and the May natural gas contract was up 1.9 cents at US$1.69 mmBTU.

Fehr said some investors were hunting for bargains in a sector that has dramatically underperformed.

"So if you are an investor looking for a bargain, perhaps that's why we're seeing a little bit more of a lift today in energy shares," he said.

Nine of the 11 major sectors of the TSX were higher. Utilities, technology and industrials were up.

Materials was marginally higher despite gold prices falling as the risk-on mood wasn't helpful to the traditional safe haven investment.

The June gold contract was down US$10.90 at US$1,643.20 an ounce and the May copper contract was down 1.65 cents at US$2.155 a pound.

"It's normal to see these types of rallies, these types of deep breaths, even in the worst of markets," Fehr said, adding that the risks remain.

The Canadian dollar traded for 70.64 cents US compared with an average of 71.14 cents US on Friday.

The health care and real estate sectors were lower.

The large U.S. health care sector was helped by gains from pharmaceutical companies like Johnson & Johnson that are testing possible vaccines for novel coronavirus.

In Canada, drugmaker Bausch Health Companies Inc. gained 6.5 per cent, but the smaller sector was hampered by cannabis companies losing ground, including Hexo Corp. falling 28.1 per cent.

Fehr said Thursday's U.S. initial jobless claims will be watched more closely than employment data at the end of the week as investors try to gauge the impact of the virus on labour markets

Jobless claims surged last week to a record of nearly 3.3 million, yet markets rose.

"So getting recessionary levels of data is not going to necessarily equate to a bad market reaction," he said.

"The labour market data will be paid attention to, insofar as it might give some future indication as we progress as to just how much how much trauma is playing out in the labor market."

This report by The Canadian Press was first published March 30, 2020.

Companies in this story: (TSX:BHC, TSX:HEXO, TSX:MEG, TSX:CNQ, TSX:GSPTSE, TSX:CADUSD=X)

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