TORONTO — An “unrelenting appetite for risk” by investors offset higher-than-expected U.S. inflation data and news of a major setback for a maker of COVID-19 vaccines, as some U.S. markets outperformed Canada’s main stock index.
The S&P 500 index closed up 13.60 points at 4,141.59, while the tech-heavy Nasdaq composite was up 146.10 points at 13,996.10.
The Dow Jones industrial average was down 68.13 points at 33,677.27 and Toronto’s S&P/TSX composite index was up a slight 2.42 points at 19,203.70.
“The mood is generally fairly optimistic and investors’ unrelenting appetite for risk is boosting stock markets broadly today,” said Candice Bangsund, portfolio manager for Fiera Capital.
“So, on the one hand, we saw U.S. inflation data this morning which was stronger than expected, but again, investors are betting that any near-term spike in inflation will prove short-lived and thus won’t be enough to warrant a policy shift or withdrawal of monetary policy support from the Fed.”
A drop in bond yields hurt bank stocks in the U.S. but helped big technology companies.
Dow component Johnson & Johnson closed 1.3 per cent lower on Tuesday after U.S. regulators recommended a pause in using its single-dose COVID-19 vaccine to investigate reports of possibly dangerous blood clots. Moderna, which also makes a COVID-19 vaccine, rose 7.4 per cent.
The potential loss of a vaccine option cast a shadow on some companies relying on ramped-up distribution to recover from the pandemic, including a broad mix of retailers, and travel-related companies like hotels were also weighed down.
The Canadian dollar traded for 79.66 cents US, unchanged from Monday.
A declining bond yield environment and the vaccine news caused investors to rotate back to the “work-from-home” growth stocks that proved popular through the pandemic, while rotating out of the more cyclical value equities consistent with reopening of the economy, said Bangsund.
That resulted in higher performance from technology and consumer discretionary sectors.
“The sectors whose fortunes are tied to the global economy such as energy, industrials, financials, the reopening trade, these are the sectors that are underperforming today and that largely explains the underperformance of the Canadian market given its more cyclical-oriented bias,” she said.
The health-care sector was the top performer in Toronto, leading the way with a 1.43 per cent gain after losing 5.61 per cent on Monday.
Cannabis firm Aphria Inc. recovered from a 14.19 per cent drubbing on Monday after it reported a disappointing first-quarter loss, jumping $1.08, or 6.18 per cent, to close at $18.55 on Tuesday. Organigram Holdings Inc. was up four per cent at $3.64.
The May crude oil contract was up 48 cents at US$60.18 per barrel after OPEC issued a forecast calling for more demand recovery in 2021. The May natural gas contract was up six cents at US$2.62 per mmBTU.
Despite the price increases, the energy sector was the worst performer in in Toronto, falling 1.05 per cent thanks to a 1.73 per cent drop in Vermilion Energy Inc., 1.65 per cent in Crescent Point Energy Corp. and 1.58 per cent in Meg Energy Corp.
The June gold contract was up US$14.90 at US$1,747.60 an ounce and the May copper contract was up one cent at US$4.03 a pound.
The materials sector rose less than one per cent as Alamos Gold Inc. posted a 5.04 per cent rise, Endeavour Silver Corp. jumped 4.61 per cent and Lundin Mining Corp. was up 4.24 per cent.