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S&P/TSX composite hits record highs on technology rebound on bond yield dip


TORONTO — A dip in bond yields prompted a strong rebound in the technology sector and drove Canada's main stock index to record highs. 

"Today is all about the snapback in that value back to growth trade and it's really being triggered by government yields paring back some of its moves higher," said Craig Jerusalim, portfolio manager at CIBC Asset Management.

The U.S. 10-year Treasury fell to 1.54 per cent after going as high as about 1.6 per cent to start the week.

In addition, the U.S. dollar lost ground.

The technology stocks moved higher because valuations increase in these long-duration assets when yields fall.

Technology was the second-best performer on the day, gaining 4.2 per cent.

Lightspeed POS In. rebounded from Monday's steep loss to increase 9.4 per cent, BlackBerry Ltd. was up seven per cent and Shopify Inc. climbed 4.7 per cent.

The S&P/TSX composite index increased 141.41 points to a record close of 18,599.19 after hitting an intraday high of 18,711.64. 

In New York, the Dow Jones industrial average was up 30.30 points at 31,832,74 after setting an intraday record. The S&P 500 index was up 54.09 points at 3,875.44, while the Nasdaq composite was up 464.66 points or 3.7 per cent to 13,073.82. 

"It's really a tug of war going on right now between the economy opening up and economic growth heating up," Jerusalim said in an interview.

He also said investors are moving from negative-yielding international bonds to higher U.S. bonds.

"The bottom line is stocks can move higher with higher interest rates (bond yields), but I just think that interest rates have moved too far, too fast, so we're seeing a little bit of relief on that front today."

 The Canadian dollar traded for 79.15 cents US compared with 78.99 cents US on Monday. 

Health care led the TSX, increased 5.7 per cent as cannabis producer shares surged. Aphria Inc. rose 11.9 per cent, Aurora Cannabis Inc. 7.1 per cent and Canopy Growth Inc. 6.5 per cent.

Materials also gained 1.8 per cent on a weaker U.S. dollar that helped gold prices as Silvercrest Metals Inc. increased 6.6 per cent.

The April gold contract was up US$38.90 at US$1,716.90 an ounce and the May copper contract was down 8.45 cents at nearly US$4.01 a pound.

Industrials were also higher even as SNC-Lavalin Inc. dropped 6.1 per cent after reporting a quarterly loss.

Energy was one of four laggards with Cenovus Energy Inc. down 2.3 per cent. Shares of Inter Pipeline Ltd. rose 1.7 per cent after the company unanimously rejected a $7.1-billion hostile offer from Brookfield Infrastructure Partners L.P.

Jerusalim expects Brookfield will likely take its fight directly to IPL shareholders, possibly with management of both companies meeting about a higher offer.

"For the deal to get done, Brookfield likely has to sweeten the bid." 

The April crude oil contract was down US$1.04 at US$64.01 per barrel and the April natural gas contract was down 0.2 of a cent at US$2.66 per mmBTU.

Despite the short-term volatility, Jerusalim expects economic growth will become extremely strong once the economy reopens and people return to the workforce and U.S. stimulus spending is distributed.

"There's lots of reasons to be optimistic. Savings rates are high and pent-up demand is high which likely leads to higher stock markets if you can stomach that volatility."

This report by The Canadian Press was first published March 9, 2021. 


Ross Marowits, The Canadian Press

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