5:45 p.m.: TSX rises to cap off good week

Canada's main stock index capped a good week by moving slightly higher Friday amid escalating tensions between the U.S. and China.

The S&P/TSX composite index closed up 28.79 points at 14,913.64 and was nearly two per cent higher for the week.

The gains south of the border were even stronger for the week, rising at least 3.2 per cent, despite a quiet day on U.S. markets ahead of the Memorial Day long weekend.

In New York, the Dow Jones industrial average was down 8.96 points at 24,465.16. The S&P 500 index was up 6.94 points at 2,955.45, while the Nasdaq composite was up 39.71 points at 9,324.59.

The run-up over the past week and more than 30 per cent climb since the late March lows is confirmation that investors think that a recovery is on its way despite concerns about a second wave of COVID-19 infections, said Kurt Reiman, chief investment strategist for BlackRock Canada.

"I would just say that the grand reopening sale in the stock market happened already several weeks ago and so most of the bargains have been pretty well picked over by now," he said in an interview.

Market gains have coincided with falling earnings estimates for the end of 2020 and 2021

"So there's just not that much value that's left in stocks given the run-up having happened alongside a sharp downward revision in earnings."

A factor clouding the outlook is growing concerns about friction between the world's two largest economies.

The U.S. senate is moving to delist Chinese companies from U.S. stock market indexes in retaliation to the start of the coronavirus in China.

The American government is also objecting to China's move Friday to impose a new security law on Hong Kong following last year's pro-democracy protests.

Also weighing on sentiment was news that China would drop its annual economic growth target for the first time.

"The fact that (the market) was extending gains against what has been a deteriorating backdrop between the U.S. and China, I think is a testament to the emerging optimism about a recovery," said Reiman.

"But looking ahead, I would just argue that it's not going to be a one-way move and that the markets now are pricing in a lot of good news and I think that the upside from here is going to be more difficult."

The Canadian dollar traded for 71.35 cents US compared with 71.76 cents US on Thursday.

Seven of the 11 major sectors on the TSX were higher, led by technology and health care.

Technology got a 2.8-per-cent lift as Kinaxis Inc. rose 5.2 per cent and Shopify Inc. padded its position as Canada's most valuable company with its shares gaining 3.2 per cent.

The tech sector has been a big winner from the coronavirus lockdowns even as some industries have struggled.

"I would just think about technology as having become even more of a staple and a key ingredient to how we live our daily lives and the infrastructure buildout that's going to be needed in the tech space to support what is likely to be a very changed relationship that people have with employment change, relationship with education, entertainment, transportation," said Reiman.

Health care was up 1.5 per cent as shares of Hexo Corp. surged 20.5 per cent and Cronos Inc. was up 8.5 per cent.

Materials rose on higher gold prices. The June gold contract was up US$13.60 at US$1,735.50 an ounce and the July copper contract was down 4.55 cents at nearly US$2.39 a pound.

Energy was the big loser on the day, falling 1.5 per cent on a lower crude oil price as Frontera Energy Corp. decreased 5.2 per cent.

The July crude contract was down 67 cents at US$33.25 per barrel and the July natural gas contract was up 2.9 cents at US$1.88 per mmBTU.

For the week, crude has increased nearly 13 per cent, helping to push up equity markets, as demand has grown and production has been cut.

But Reiman warned that the dynamics won't help to lift prices much more over the next six months.

"I still think this is going to be a difficult period for oil because even if the economy is reopened, it doesn't mean that behaviourally people are just going to go back to the way things were.

--

1:00 p.m.: North American markets rangebound through midday

North American markets plodded sideways through the midday trade, with the S&P/TSX Composite Index, S&P 500 and Nasdaq Composite Index essentially unchanged and the Dow Jones Industrial Average down 0.4 per cent. Trading volumes were lower than average ahead of the Memorial Day long weekend in the United States.

In Toronto, six of the 11 TSX subgroups were in positive territory, led by information technology, health care and materials. The heavyweight financial and energy sectors were the largest percentage decliners.

Oil continued to bounce along the lows of the session, with U.S. benchmark West Texas Intermediate down 3.15 per cent to trade at US$32.85 per barrel. Alberta’s Western Canadian Select fell about two-and-a-half per cent to US$24.02 per barrel.

--

9:35 a.m. ET: North American markets flatline, oil prices slide

North American equity markets got off to a muted start to Friday’s trade, with the S&P/TSX Composite Index, S&P 500, Dow Jones Industrial Average all essentially flat to kick off the trading session. While the action to cap off the week was modest, the four main North American indices were on track for gains of nearly three per cent across the board for the week.

Oil prices retreated, with U.S. benchmark West Texas Intermediate down about three per cent to trade at US$32.85 per barrel after threatening to breach the US$35 level earlier in the week. WTI is threatening to snap a six-session rally – the longest since February 2019 – after China declined to offer an economic growth target due to the significant uncertainty surrounding the impact of the COVID-19 pandemic.

Alberta’s Western Canadian Select fell 5.89 per cent to US$23.16 per barrel, though Canadian crude is only priced a handful of times per day.

The Canadian dollar was under pressure against its American counterpart, down nearly half a cent to 71.22 cents U.S.

--With files from BNN Bloomberg's Ian Vandaelle