November kicks off with positive growth
TORONTO — Canada’s main stock index started November by notching a third straight day of positive growth led by higher metals and materials.
Despite the bounce back from a very weak October, it may be premature to celebrate just yet, says Kash Pashootan, CEO and chief investment officer at First Avenue Investment Counsel Inc.
“We’re not getting overly enthused or turning positive just yet because we feel that it’s still too early to say we have turned the corner,” Pashootan said in an interview.
Being late in the bull run, he said it’s difficult to see how equities will generate even high single-digit increases amid volatility.
Some of the tech and industrials names that led the correction have regained some footing over the past three days amid strong third-quarter corporate results that helped to inject positive sentiment.
But Pashootan said some big companies that have yet to report could be a determining factor if the bounce back will stick — chief among them is Apple Inc. “We’re going to need the world’s largest company to have solid numbers reported, or otherwise you could see a quick reversal of this threeday optimism that’s come back,” he said.
The company reported fiscal fourthquarter earnings of $14.13 billion US after markets closed. The net income of $2.91 per share surpassed Wall Street expectations of $2.79 per share. But its holiday outlook suggested weaker demand for expensive new iPhones.
The S&P/TSX composite index closed up 122.87 points to 15,150.15. Metals, materials and gold rose by at least 3.7 per cent, while utilities, financials, utilities and consumer staples led on the downside.
It’s been a good week for the Toronto Exchange. “You’re seeing this tug of war continue between the market trying to decide if overall it’s feeling optimistic because of Q3 earnings or it’s still trying to finish the cleansing process of the correction that started a couple of weeks back,” Pashootan said.
In New York, the Dow Jones industrial average gained 264.98 points to 25,380.74. The S&P 500 index was up 28.63 points to 2,740.37, while the Nasdaq composite was up 128.16 points at 7,434.02.
The Canadian dollar traded at an average of 76.41 cents US compared with an average of 76.09 cents US on Wednesday.
The December crude contract was down $1.62 to US$63.69 per barrel and the December natural gas contract was down 2.4 cents at US$3.24 per mmBTU.
Crude is down about five per cent for the week but more decreases are likely, noted Pashootan.
“Investors should be watching in the coming months because the real reasons why the commodity price rose in the first place not being supply and demand, but more so supply disruptions.”
The December gold contract was up US$23.60 at US$1,238.60 an ounce and the December copper contract was up 6.25 cents at US$2.72 a pound.
Meanwhile, the Petroleum Services Association of Canada is predicting more pain for the oil and gas sector next year. It predicts 6,600 wells will be drilled in Canada in 2019, down about five per cent from an expected 6,980 wells this year, adding that translates to a year-over-year decrease of up to $1.8 billion in capital spending by exploration and production companies. The oilfield services sector in Canada is headed for a third year of stalled activity as export pipeline capacity constraints keep petroleum prices low. It forecasts an average Western Canadian Select price discount to New York-traded West Texas Intermediate of $24.50 per barrel next year, $10 above typical differences.