North American markets moved higher Monday as investor sentiment rallied in the aftermath of what was the worst week for stocks so far this year.
The S&P/TSX composite index was up 40.94 points at 20,260.13.
In New York, the Dow Jones industrial average was up 72.17 points at 32,889.09. The S&P 500 index was up 12.20 points at 3,982.24, while the Nasdaq composite was up 72.04 points at 11,466.98.
Buoyed by strength in the industrial and base metals sectors, markets on Monday recovered some of their losses from last week, which was the worst week for stocks since the year began.
But Allan Small, senior investment advisor at IA Private Wealth, said Monday’s “muted” rally was more about the absence of news than any particularly positive economic event or corporate earnings report.
It's a continuation of a pattern that has been repeated all year, Small added.
“On days when you have Federal Reserve commentary ... you tend to get the market sell-off,” he said.
“On days when there really is nothing to report — economic data isn’t coming at you hot or there’s no Fed-speak — the market seems to gain some traction and move higher.”
Investors have been worrying for months about the possibility of recession in the wake of a series of rapid interest rate hikes by central banks last year. Each time the U.S. Federal Reserve raises rates, or Fed Chair Jerome Powell hints that inflation remains too hot, stocks fall.
But in spite of predictions by economists that an economic downturn is likely this year, reports on everything from the job market to consumer spending to inflation itself have been coming in firmer than expected over the last few weeks.
Small said that's why markets fell less week. Investors are afraid that if these economic indicators remain hot, the U.S. central bank will keep raising interest rates and tip the balance into a potentially sharp recession.
"That was the direction last week, the worst week of the year," Small said.
"This week we've obviously turned a page, but we'll have to see. The macro is ruling the day, every day, for now."
On the TSX, Toronto-Dominion Bank's stock price lost 56 cents, or 0.61 per cent, Monday on news that the bank will pay US$1.2 billion to settle a lawsuit related to one of the largest Ponzi schemes ever orchestrated.
The bank, along with several other financial institutions, was about to face trial in the case in Texas for its alleged role in the $7 billion scheme operated by the Stanford Financial Group.
Shares in Quebec's Uni-Select Inc. shot up by more than 16 per cent Monday on news that it's struck a deal to be acquired by U.S.-based automotive equipment supplier LKQ Corp. for roughly $2.8 billion.
The Canadian dollar traded for 73.68 cents US compared with 73.41 cents US on Friday.
The April crude contract was down 64 cents at US$75.68 per barrel and the April natural gas contract was up 18 cents at US$2.73 per mmBTU.
The April gold contract was up US$7.80 at US$1,824.90 an ounce and the May copper contract was up six cents at US$4.01 a pound.
Small said heading into March, investors will continue to watch the key figures that will dictate central bank behaviour — jobs numbers, consumer spending, retail sales, and of course, monthly inflation.
Until something changes, he said he expects the investing environment to continue in an almost Groundhog Day-like pattern — with the gains of one week being erased by the next week's hot data release or Federal Reserve comment.
"We’ve got to get out of this scenario, but the only way out is for the Fed to pause interest rate hikes," Small said.
"Until then, I think we’re going to be range-bound.”
This report by The Canadian Press was first published Feb. 27, 2023.
Companies in this story: (TSX:GSPTSE, TSX:CADUSD=X)
Amanda Stephenson, The Canadian Press
