reassurance from yellen lifts markets
• North American stock markets racked up solid gains Tuesday thanks to reassuring words from the new chair of the U.S. Federal Reserve.
The S&P/TSX composite index jumped 86.81 points to 13,880.99 after Janet Yellen said that while she thinks the U.S. economy is strong enough to weather a cutback in a key stimulus program, rates should stay low to support a still lacklustre economy.
The Canadian dollar was up 0.31 of a cent to US90.77¢.
New York’s Dow Jones industrials surged 192.98 points to 15,994.77, while the Nasdaq was up 42.88 points at 4,191.05 and the S&P 500 index added 19.91 points to 1,819.75.
Ms. Yellen told a congressional committee that she expects a “great deal of continuity” with her predecessor, Ben Bernanke. And she said that if the economy keeps improving, the Fed will take “further measured steps” to reduce the support it’s providing through monthly bond purchases. So far, the Fed has moved twice over the last two months to cut its bond buying program by a total of US$20-billion to $65-billion and analysts generally expect the Fed to continue cutting by $10-billion every meeting.
Ms. Yellen’s remarks to the House financial services committee had been highly anticipated, particularly with last week’s U.S. employment data for January falling well short of expectations and amid fresh worries about how emerging markets are dealing with Fed tapering.
“I think it just built up the wall of worry that we spent all year last year knocking down,” said Philip Petursson, director of institutional equities at Manulife Asset Management. “Markets just want some reassurance and it looks like they’re getting it.”
There was also relief that Congress appeared poised to raise the U.S. borrowing limit without the political drama that happened late last year and in 2011. That would avert the threat of a default on the U.S. government’s debt.
On the earnings front, Cineplex Inc. had $20.2-million of net income or 32¢ per share, well below estimates of 48¢. Revenue of $323.2-million also missed estimates and its shares fell 62¢ to $40.88.
Flight simulator maker CAE Inc. had $46.1-million of net income in its third quarter, up from $37.5-million a year earlier. Revenue grew to $513.6-million, up 2.5% from a year earlier and its shares were 49¢ higher at $14.39.
Mining stocks led TSX advancers with the gold group ahead just over 3% as the bullion moved ahead $15.30 to US$1,290.10 an ounce.The March copper contract was down US1¢ to US$3.21 a pound ahead of what could be some further negative news from China after data last week showed the manufacturing sector in the world’s second-biggest economy was still expanding but at a slower pace. The energy sector was ahead 0.34% even as crude oil edged US12¢ lower to US$99.94 a barrel.
The financials sector also provided lift, up 0.4%.