TORONTO — Canada’s main stock index reached its highest level in four months Monday on a big surge in cannabis stocks.
The S&P/TSX composite index closed up 96.01 points at 15,602.32 after hitting an intraday peak of 15,606.34. That’s the highest level since Oct. 8.
“The recent rally in the health-care sector, particularly the pot stocks, is providing a big portion of the lift for the TSX,” says Craig Fehr, a Canadian markets strategist for Edward Jones.
The health care sector gained five per cent on the day led by cannabis heavyweights Aphria Inc. which rose by nearly 13 per cent, Cronos Group Inc. 12 per cent and Aurora Cannabis 8.8 per cent on heavy trading.
Technology was up 1.6 per cent to follow the direction of the U.S. sector.
Energy was up more than one per cent despite a dip in crude oil prices.
The March crude contract was down 70 cents to US$54.56 per barrel and the March natural gas contract was down 7.4 cents at US$2.66 per mmBTU.
The rally in oil prices over the past few weeks along with an improved performance of cannabis stocks have provided a lift for the TSX in 2019 and contributed to an 8.5 per cent gain for the market in January.
“Those two sectors, I would say, have provided the majority of the lift for the domestic market,” Fehr said in an interview.
The influential industrials sector lost 0.09 per cent while materials was up just 0.14 per cent as gold prices fell.
The April gold contract was down US$2.80 at US$1,319.30 an ounce and the March copper contract was up 2.15 cents at US$2.79 a pound.
The Canadian dollar traded at an average of 76.18 cents US, down from Friday’s average of 76.37 cents US, which was the highest level since Nov. 7.
In New York, the Dow Jones industrial average gained 175.48 points at 25,239.37. The S&P 500 index was up 18.34 points at 2,724.87, while the Nasdaq composite was up 83.67 points at 7,347.54.
North American markets have been driven higher by an improved outlook for economic growth, higher corporate profits, dovish monetary policy particularly on interest rate hikes and hope that a U.S.-China trade skirmish will be resolved, said Fehr.
U.S. corporate profits have set a positive tone even though they are a bit more mixed than a year ago. Alphabet Inc. beat analyst expectations in reporting after markets closed that it earned US$8.95 billion in the fourth quarter, compared with a loss a year earlier. Net revenues after deducting advertising commissions was US$31.84 billion.
“We’re getting some relief in the market as earnings announcements have come in that show that corporate America — and I think as we start to see TSX reports corporate Canada as well — is a little bit healthier than perhaps was the expectation as we went through that decline in late 2018,” said Fehr.
The Canadian corporate profit outlook is “decent” even though the TSX doesn’t have the balance across industries and sectors as the U.S., he added.
“So we can see quarter to quarter things can be a bit distorted but I think the corporate profit outlook is still more positive than negative at this stage for the TSX.”
Companies, index and currency in this story: (TSX:APHA, TSX:ACB, TSX:CRON, TSX:GSPTSE, TSX:CADUSD)
Ross Marowits, The Canadian Press