TORONTO — Commodity sectors pushed Canada's main stock index higher even as U.S. markets were hurt by news of inflation soaring to a 40-year high last month and talks between Russia and Ukraine going nowhere.
"It's the exact opposite of what we saw yesterday where you had a pretty significant bounce in all the risk-on parts of the market," saidMike Archibald, vice-president and portfolio manager with AGF Investments Inc.
The S&P/TSX composite index closed up 88.47 points to 21,581.70 after dipping as low as 21,371.93.
In New York, U.S. markets recovered some of the day's losses but still ended lower. The Dow Jones industrial average lost 112.18 points at 33,174.07. The S&P 500 index was down 18.36 points at 4,259.52, while the Nasdaq composite was down 129.59 points at 13,129.96.
Archibald said there continues to be a battle between growth and value assets. Wednesday saw a big bounce in growth sectors like technology, but that reverted a day later with the best-performing sectors being materials and energy that are helped by higher inflation and the "geopolitical mess that we're in."
The U.S. said Thursday that inflation increased 7.9 per cent year-over-year in February. That doesn't include the impact on prices from Russia's war with Ukraine.
Meanwhile, talks in Turkey between the foreign ministers of Russia and Ukraine failed to deliver a ceasefire or any improvement in the deadly conflict.
Archibald said Thursday's market movement is a snapshot of the situation so far in 2022 with the TSX up 1.7 per cent, while the Dow, S&P 500 and Nasdaq are down 8.7, 10.6 and 16.1 per cent, respectively.
"That's all related to just commodity exposure. So to the extent that this continues, Canada is going to be a very good place to have your capital parked."
Materials was the best-performing sector on the day, gaining 2.3 per cent on higher metals prices with Endeavour Silver Corp. up 8.1 per cent.
The April gold contract was up US$12.20 at US$2,000.40 an ounce and the May copper contract was up eight cents at US$4.65 a pound.
"Gold is up. It's not a lot, but it continues to act as a really good hedge to the macro and geopolitical uncertainty," said Archibald.
Energy was up 1.7 per cent after Wednesday's sharp selloff even though crude prices fell for a second day. Shares of Arc Resources Ltd. were down 6.6 per cent.
The April crude oil contract was down US$2.68 at US$106.02 per barrel and the April natural gas contract was up 10.5 cents at US$4.63 per mmBTU.
While oil prices were lower, a "war premium" will likely move them higher, Archibald said, adding there aren't a lot of solutions for increasing energy supplies as countries like the U.S. ban imports from Russia.
"I think the market is starting to realize that the energy companies offer you both a great inflation hedge and also are going to continue to earn massive, massive profits in this environment and still aren't that expensive."
The Canadian dollar traded for 78.27 cents US compared with 78.00 cents US on Wednesday.
Technology was the biggest laggard of the three sectors on the TSX that fell on the day. It lost 2.1 per cent with Shopify Inc. dropping 6.2 per cent after surging 13.6 on Wednesday.
While the market focus will continue to be on Ukraine, Archibald said investors will soon focus on commentary from the upcoming Federal Reserve meeting.
"They're clearly going to raise interest rates next week. The question just is what is the guidance going to look like and right now the market's got six interest rate hikes for next year. It will be important to kind of get a sense from (chairman Jerome) Powell as to, you know, whether or not that's accurate."
This report by The Canadian Press was first published March 10, 2022.
Companies in this story: (TSX:EDR, TSX:SHOP, TSX:ARX, TSX:GSPTSE, TSX:CADUSD=X)
Ross Marowits, The Canadian Press
