Record run by S&P/TSX composite continues amid small gains offset by commodities

TORONTO — The record run by Canada's main stock index continued on a quiet day of trading Wednesday as investors took a pause between the end of the first quarter and earnings season starting next week.

"It's been a period where investors are just waiting to see what happens next because Q1 was definitely volatile," said Greg Taylor, chief investment officer of Purpose Investments.

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"It's all really getting set up for whether this earnings season is going to be as good as everyone expects and I think it should be off-the-charts good given the year-over-year comps."

The second quarter should be dramatically better than a year ago when the impact of the COVID-19 pandemic started to hurt corporate results while workers stayed home and lockdowns began.

Investors are also watching to see if central banks start to take their foot off the gas in terms of stimulus, something it appears they're in no rush to do.

Minutes released from the recent Federal Reserve meeting reinforced that view, with the U.S. central bank prepared to let things run as members believe inflation increases are more transitory than structural.

"That should be good for risk assets and I'm positive on the market for the next few months thinking that we are going to get a good run as the stimulus keeps coming," Taylor said in an interview.

While stock markets "could go for a run for the next few months," he said it could be harder to make money in the second half of the year as people start to worry that things have gotten ahead of themselves and central banks start to ease emergency measures.

JPMorgan Chase CEO Jamie Dimon was also optimistic about the U.S. economic outlook in his annual letter that is closely followed by market watchers.

"What he's saying is basically there's positive momentum, there's so much money out there it has to go somewhere and this could keep the bull market going for longer than everyone thinks," said Taylor.

The S&P/TSX composite index gained 24.93 points to a record close of 19,129.07 after setting a intraday high of 19,177.96.

In New York, the Dow Jones industrial average was up 16.02 points at 33,446.26. The S&P 500 index was up 6.01 points to a record close of 4,079.95, while the Nasdaq composite was down 9.54 points at 13,688.84.

Seven of the 11 major sectors on the TSX climbed, but none increased more than 0.77 per cent.

A 3.7 per cent gain by Alimentation Couche-Tard Inc. helped consumer staples while Gildan Activewear Inc. rose three per cent to help consumer discretionary.

The day also saw MDA Inc. shares begin trading following its IPO. They closed up 3.9 per cent to $14.55.

Health care was the biggest laggard, losing 2.4 per cent as Aurora Cannabis Inc. and Aphria Inc. lost 6.4 and six per cent, respectively.

Energy and materials also lost ground.

Energy dropped despite higher crude oil prices as investors worried if pandemic lockdowns in Canada and Europe could hurt demand. There's also some concern that prospects of a new nuclear deal with Iran could bring on more oil supply to market, said Taylor.

Ultimately, energy should have a good year after being forgotten by so many investors, he said.

"The companies have restructured and are much more profitable at these levels and if oil starts to hold higher than $50, higher than $60 level, I think these companies are still set up for a really positive 2021."

Canadian Natural Resources Ltd. decreased 1.6 per cent.

The May crude contract was up 44 cents at US$59.77 per barrel and the May natural gas contract was up 6.4 cents at US$2.52 per mmBTU.

The Canadian dollar traded for 79.26 cents US compared with 79.62 cents US on Tuesday.

Materials moved lower on the stronger U.S. dollar that curtailed gold prices. The June gold contract was down US$1.40 at US$1,741.60 an ounce and the May copper contract was down 6.2 cents at US$4.05 a pound.

This report by The Canadian Press was first published April 7, 2021.

Companies in this story: (TSX:CNQ, TSX:ATD.B, TSX:GIL, TSX:MDA, TSX:GSPTSE, TSX:CADUSD=X)

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