TSX climbs to new record on wide gains, loonie up and U.S. markets close higher

Canada’s main stock index rose to a new record high, led by strength in energy, telecom and base metals, while U.S. markets also moved higher.

The S&P/TSX composite index closed up 116.67 points at 22375.83.

In New York, the Dow Jones industrial average was up 331.37 points at 39387.76. The S&P 500 index was up 26.41 points at 5214.08, while the Nasdaq composite was up 43.51 points at 16346.26.

Canadian companies reporting earnings Thursday included Canadian Tire, which warned of waning consumer demand, as well as Telus, Quebecor and Manulife.

This earnings season in both Canada and the U.S. has been characterized by stronger-than-expected results, but cautious outlooks from firms, said Kevin Burkett, portfolio manager at Victoriabased Burkett Asset Management.

Wednesday’s report from Shopify, which saw its share price down almost 20 per cent that day, was a prime example, said Burkett.

“Their earnings weren’t so much the trouble, it was weak guidance,” he said, adding that the stock slide “dragged down the TSX.”

The markets are responding positively to earnings beats, but much more harshly to misses, added Burkett.

“I think investors are generally waiting and watching earnings for indication of where we are in the economic cycle. And that’s especially true with Shopify,” he said.

“Clearly the market was taken by surprise by just how weak their forward outlook was.”

In the U.S., where earnings season is almost over, it has been mostly positive surprises, said Burkett.

Although this week is thin on major economic data, one report showed that in the U.S., the number of workers applying for unemployment benefits rose more than expected last week.

That follows a recent weaker-thanexpected jobs report in the U.S., as investors continue to take bad economic news as good news for interest rate cuts.

“[At] the end of last year, everyone was expecting imminent rate cuts, and that has absolutely not come to pass. And the reason it has not come to pass is because earnings have been pretty resilient, business conditions have remained good,” said Burkett.

Cuts are expected much sooner in Canada, where economic data has shown more signs of slowing.

But there are concerns that the central banks are holding off on cuts for too long, said Burkett, given the lag effect of higher interest rates.

The Bank of Canada’s Financial Stability Report released Thursday said Canadians continue to adjust to higher interest rates, with more mortgage holders in the coming years set to renew at higher rates.

“We’re seeing now more and more of those mortgages come up for renewal, and renewal at significantly higher rates,” said Burkett.

The Canadian dollar traded for 73.04 cents US compared with

72.81 cents on Wednesday.

The June crude oil contract was up 27 cents at $79.26 US per barrel and the June natural gas contract was up

11 cents at $2.30 US per 1,000 cubic feet.

The June gold contract was up $18.00 US at $2,340.30 US an ounce and the July copper contract was up five cents at $4.59 US a pound.