TORONTO – The Toronto stock market reached a symbolic landmark Tuesday, with its main index closing above 11,000 points for the first time since Oct. 1 when investors began to realize that Canada was being dragged into a major recession.
The S&P/TSX composite index added 230.95 points or 2.14 per cent to close at 11,018.10, ending the first day of trading in August on an upbeat note after gaining more than four per cent throughout July.
However, the index, which tracks a selection of Canada’s most important publicly traded companies, remains more than 4,000 points or 37 per cent below an all-time high of 15,154 set in June 2008.
Canada’s senior stock market has benefited in the last several months on rising demand in China for metals, coal, oil and other resources, but that advance has been choppy and prone to volatile swings. However, the jury is still out on whether recent solid statistics about the U.S. housing market reflect a long-term recovery in that pivotal sector, which consumes Canadian-made lumber, copper pipe and numerous other building products.
Good prospects in the U.S. industrial manufacturing sector are also raising hope of rising demand down the road.
John Johnston, chief strategist with the Harbour Group at RBC Dominion Securities, said the index is “just shy” of 11,317 – the point at which it will have retraced 50 per cent of its losses since financial markets began to crumble in the latter half of 2008.
Johnston said positive data out of the manufacturing and housing sectors are driving the numbers.
“The fact of the matter is that you’re getting a decent number of favourable surprises in the economic numbers,” Johnston said.
“Housing was what led us into this and the housing market is showing definite signs of stabilizing and maybe even improving ever so slightly.”
Tuesday’s rise about the 11,000 point came after good news in the manufacturing, housing and banking sectors sent New York markets sharply higher Monday while Toronto was closed for the long weekend.
On Tuesday, news that U.S. pending home sales increased by 3.6 per cent month-over-month in June greatly exceeded economists’ expectations of a 0.7 per cent increase and will boost demand for many metals.
In addition, an important U.S. manufacturing index jumped 4.1 points in July to 48.9, exceeding economists’ expectations of 46.5. The increase was the fourth in a row and the largest monthly improvement since September 2005.
“Companies had cut production almost to zero, certainly in the auto sector that happened to a number of companies, and now they’re ramping up production to more normal levels, so you’re getting this big V pattern on the production side of things,” Johnston said.
“There’s still issues out there but the fact of the matter is, evidence is accumulating that the economy is stabilizing or starting to turn higher.”
Two New York indexes also broke important psychological barriers this week, with the S&P 500 breaking above 1,000 points for the first time in nine months and the Nasdaq composite index closing above 2,000 for the first time since October on Monday.
The base metals sector led Toronto’s gain, adding per 3.7 cent.
Bob Tebbutt, vice-president at Peregrine Financial Group, said the sector is responding to improvements in demand for both new houses and new vehicles.
“The base metals – copper, aluminum, tin, zinc, lead and nickel – made new highs Monday,” Tebbutt said.
“There’s been a little sell off today, but the TSX metals section is catching up to Monday’s strong market action in London and New York.”
The September crude contract on the New York Mercantile Exchange slipped 16 cents to US$71.42.
However, the Toronto energy sector was up three per cent, responding to Monday’s US$2.13-per-barrel surge in oil prices.
The gold sector gained 2.1 per cent as the December bullion contract added $10.90 to US$969.70. The financial sector rose 1.5 per cent.
The loonie also gained Tuesday, adding 0.26 cent from Friday’s close to 93.07 cents US on higher commodity prices.
The TSX Venture Exchange gained 16.41 points to 1,195.98.
In New York, markets ended the day slightly higher on news that American consumers boosted their spending by 0.4 per cent in June.
The Dow Jones industrial average added 33.63 points to 9,320.19, while the Nasdaq composite index rose 2.70 points to 2,011.31.
The S&P 500 edged up 3.02 points to 1,005.65.
In Canadian corporate news, pulp and paper giant Domtar Corp. (TSX:UFS) said its net profits doubled in the second quarter to US$48 million or $1.12 per share.
The news sent its shares soaring by $5.36 or 26.2 per cent to $25.82.
And cheese-maker Saputo Inc. (TSX:SAP) reported net earnings of $84.8 million or 41 cents per share for the quarter ended June 30, up 2.2 per cent from a year-earlier. The company’s shares gained $1.41 or six per cent to $24.95.
Major international companies reporting earnings included mining company Xstrata PLC, which saw its profits fall 77 per cent to US$643 million.
Swiss bank UBS AG posted a second quarter loss of 1.4 billion Swiss francs (US$1.3 billion) – more than three times the 395 million franc loss for the same period of 2008.
And agribusiness company Archer Daniels Midland Co. said its fiscal fourth-quarter profit tumbled 83 per cent to US$64 million.