David Fingold's Market Outlook
4:10 p.m. ET: Dow erases 937-point gain, TSX swings wildly in volatile trading
North American equity markets flatlined to cap off Tuesday’s trade, ending the session mixed after rallying out of the open. The S&P/TSX Composite finished with a modest gain; while the S&P 500, Dow Jones Industrial Average and Nasdaq Composite all finished in the red.
It was a volatile session for the major indices, with the TSX sliding three-and-a-half per cent from peak to trough. The Dow, meanwhile, gave up a 937-point gain that was logged shortly after trading started.
Brian Madden, senior vice president and portfolio manager at Goodreid Investment Management, said he expected investors will be in for plenty of volatile swings until the impact of the virus outbreak shakes out. In an email to BNN Bloomberg, Madden said that volatility will likely be more pronounced at the beginning of the trading week.
“In financial crises, and in volatile markets generally, Mondays have often been gap down days as bad news comes out over the weekend,” he said. “That risk is amplified this week, with the Good Friday holiday making it a three-day weekend, which just allows more time for news to break.”
Crude oil faded badly into the end of the day, with U.S. benchmark West Texas Intermediate falling seven-and-a-half per cent and Alberta’s Western Canada Select settling below US$4 per barrel to plumb near-record lows after sinking 56 per cent Tuesday.
Safe-haven assets fell, with U.S. 10-year bonds slipping, sending yields higher. Gold also lost ground, as it fell about US$10 per ounce at 4 p.m. ET to leave the precious metal trading at US$1,683 per ounce.
The U.S. dollar fell against all of its major peers, resulting in a positive showing for the Canadian dollar, which was trading near 71.50 cents U.S. at 4p.m. ET.
In Toronto, the TSX held in technical bull territory, up more than 20 per cent from the March 23 lows, but strategists have been hesitant to label this the beginning of a sustained upward trend. The composite remains about 24 per cent below February’s peak.
Real estate, consumer discretionary and consumer staples were the lead percentage gainers on the benchmark Canadian index. On a stock-specific basis, Chorus Aviation Inc., and Genworth MI Canada Inc. posted the largest percentage gains. A slate of gold names were among the lead laggards, following the precious metal lower.
Madden said there will likely be more volatility in the weeks to come as earnings season picks up in earnest.
“U.S. corporate earnings releases start next week, and of course the spoiler alert that spoils nothing for anyone is that they will be universally pretty ugly,” he said. “We may be carving out a bottom here, but recovery is unlikely to be immediate or linear.”
1:00 p.m. ET: Equity bounce off lows, oil reverses course
North American markets recouped some of the gains that were lost in mid-morning trading, with the S&P/TSX Composite Index rising more than two per cent and the Dow Jones Industrial Average leading the way south of the border as it advanced approximately three per cent.
In Toronto, 10 of the eleven subgroups were in positive territory, with consumer discretionary, real estate and financials posting the largest percentage gains. Info tech was the only sector on the TSX in negative territory.
On a stock-specific basis, the leaders were a mixed bag in terms of sector membership, with Seven Generations Energy Ltd., Chorus Aviation Inc. and Alaris Royalty Corp. notching the largest percentage gains.
Oil prices gave up their gains, with U.S. benchmark West Texas Intermediate falling nearly a full percent into the afternoon trade, after being solidly in positive territory earlier in the day. Alberta’s Western Canadian Select fared far worse, with Canadian crude prices falling more than 30 per cent to trade just shy of US$6 per barrel.
10:40: North American equity markets pare gains into mid-morning
North American equity markets pared some of their early gains into the mid-morning, but remained in positive territory. The S&P/TSX Composite Index was the strongest performer, rising nearly two-and-a-half per cent; the S&P 500 and Dow Jones Industrial Average rose more than one-and-a-half per cent; and the tech-heavy Nasdaq Composite advanced about one per cent.
In Toronto, nine of the 11 TSX subgroups were in positive territory, with consumer discretionary, real estate and financials leading the index on a percentage basis. Info tech and materials were the only sectors underwater.
Crude oil hung onto its gains, with U.S. benchmark West Texas Intermediate up about two per cent.
9:40 a.m. ET:
North American equity markets rallied in early trading, with the S&P/TSX Composite Index rising a little more than two per cent, and the S&P 500, Dow Jones Industrial Average and Nasdaq Composite all notching gains of more than two-and-a-half per cent, extending yesterday’s gains.
Risk assets like equities have been climbing amid cautious optimism over the slowing growth of COVID-19 cases across the globe.
The Canadian dollar was up nearly a full per cent against its U.S. counterpart, rising above 71.50 cents U.S., though the greenback was exhibiting weakness against all of its major peers.
Oil gained some ground in early trading, with U.S. benchmark West Texas Intermediate rising modestly on speculation Saudi Arabia and Russia might be able to reach a truce in their price war. Alberta’s Western Canadian Select was little changed, though WCS is only priced a handful of times per day. The OPEC+ group is expected to meet to discuss potential curtailments Thursday.
While Toronto’s benchmark index has risen more than 20 per cent from its March 23 low, putting the composite in a technical bull market, some market watchers are warning investors against becoming too optimistic about the trajectory.
In a note to clients, Rosenberg Research and Associates chief economist and markets strategist David Rosenberg said the rally does not carry the hallmarks of a true bull run.
“From my lens, what we are seeing unfold this week in equities is a classic bear market rally. It is not the start of a new bull market,” he said. “This run-up is purely speculative, nothing fundamental behind it, and we can see that volumes have been way below average which tells you that there is not a very high conviction level —nor should there be.”