Markets bounce back after correction
TORON TO • The Toronto stock market closed higher Tuesday after a string of sharp losses prompted by emerging market worries.
The S&P/TSX composite index ran ahead 105.37 points to 13,687.66, with gains spread across all sectors, after tumbling 400 points over the previous three sessions.
The Canadian dollar closed at a fresh 4 1/2 year low, down 0.35 of a cent at US89.64¢.
U.S. indexes were higher as traders shrugged off a surprisingly weak durable goods orders report for December and concentrated on other data showing U.S. consumer confidence has reached its highest point since August on the strength of a brighter view of the job market and business conditions.
The Dow Jones industrials was up 90.68 points to 15,928.56, the Nasdaq composite index moved up 14.35 points to 4097.96 and the S&P 500 index rose 10.94 points to 1792.5.
Markets have been severely buffeted over the last few sessions on concerns about emerging markets, including slowing growth in China, the world’s secondbiggest economy.
Investors have also been jittery because of currency turmoil involving the Turkish lira, the Russian ruble and the Indian rupee as investors wonder how the U.S. Federal Reserve’s policy to reduce its monetary stimulus impacts on them.
“What’s fearful is that currency instability often leads to economic and stock instability,” observed John Stephenson, port- folio manager at First Asset Funds.
Investors felt reassured after the People’s Bank of China on Tuesday injected more money into the country’s financial markets to ease strained credit conditions.
India’s central bank unexpectedly raised interest rates to prop up its ailing currency and Turkey’s central bank was expected to follow suit at an emergency policy meeting called after the lira hit a series of record lows.
The Fed’s massive bond purchases over the last few years has resulted in a stream of cheap money into those markets. But now the central bank is cutting back on those asset purchases.
The Fed is widely expected to further pare its bond purchases by another US$10billion a month to US$65-billion on Wednesday.
At the same time, analysts have suggested that North American stock markets are vulnerable to a correction after Fed monetary easing helped underpin a strong rally on many equity markets last year that left the S&P 500 up about 30% for 2013. That index is now down about 3.5% year to date.
“We’ve had a correction. I don’t see us going down 10%, and three, four per cent, that’s a pretty healthy correction and it’s time to start looking to buy,” Mr. Stephenson said.
All TSX sectors were higher with gains paced by a 2.89% rise in the base-metals sector even as March copper on the Nymex was off a penny at US$3.25 a pound. Teck Resources was ahead 85¢ to $27.73, while Thompson Creek Metals gained 18¢ to $3.03.