Stocks rally after two days of losses over COVID worries

TORONTO — North American stock markets finished strong on Tuesday as they rebound from a sharp selloff that was sparked by concerns about COVID-19 variants on Monday.

It marked an end to two straight days of heavy losses that saw Canada’s main stock index drop more than 500 points starting Friday.

Erik Bregar, head of currency strategy at the Exchange Bank of Canada, said market sentiment has recovered, although trends for the rest of the week will be hard to predict.

“If there’s anything that could probably shake up things, it might be the European Central Bank meeting on Thursday, but unless they give us some sort of dovish surprise, I don’t see much directionality for the week,” said Bregar.

“I wouldn’t be surprised if we’ve seen the big volatility for the week already.”

The S&P/TSX composite index was up 216.26 points at 19942.71.

In New York, the Dow Jones industrial average was up 549.95 points at 34511.99. The S&P 500 index was up 64.57 points at 4323.06, while the Nasdaq composite was up 223.90 points at 14498.88.

Health-care and consumer discretionary stocks led the charge on the TSX, with 2.93 per cent and 2.19 per cent increases in those indexes respectively.

Rebounding oil and gas prices also helped lift the Canadian market, with the TSX’s energy index rising by 1.41 per cent.

The September crude oil contract was up 85 cents at $67.20 US per barrel and the August natural gas contract was up 9.7 cents at $3.87 US per mmBTU.

The prospect of looser border restrictions appeared to give airline stocks a lift.

Air Canada ended the day up $1.52, or 6.5 per cent, at $24.96, while travel company Transat A.T. was up 24 cents or 4.3 per cent at $5.88.

The federal government announced Monday that as of Aug. 9, fully vaccinated U.S. citizens and permanent residents will be allowed to enter the country, with the rest of the world to follow Sept. 7.

The Canadian dollar also rose Tuesday, trading for 78.55 cents US compared with 78.38 cents US on Monday.

In the U.S., a pause in the decline of bond yields stuck out the most throughout the course of the day.

“I think the precipitous decline in U.S. yields … has really been the story of markets over the last month,” said Bregar.

“People have had a really hard time explaining why, and so today we’re seeing a nice technical balance.”

Ten-year U.S. Treasury bond yields rose by three basis points to 1.215 per cent on Tuesday, with yields on 30-year bonds rising five basis points to 1.87 per cent (a basis point is one-hundredth of a per cent).