North American stock markets rally after two days of heavy losses

·3 min read

TORONTO — North American stock markets finished strong on Tuesday as they rebound from a sharp sell-off that was sparked by concerns around 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 in an interview.

“I wouldn’t be surprised if we’ve seen the big volatility for the week already and we’re kind of just meandering for the rest of it.”

The S&P/TSX composite index was up 216.26 points at 19,942.71.

In New York, the Dow Jones industrial average was up 549.95 points at 34,511.99. The S&P 500 index was up 64.57 points at 4,323.06, while the Nasdaq composite was up 223.90 points at 14,498.88.

Healthcare 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 US$67.20 per barrel and the August natural gas contract was up 9.7 cents at US$3.87 per mmBTU.

Oil prices had plunged on Monday as concerns around rising case counts the Delta coronavirus variant led to a weaker demand outlook for the commodity.

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.

"It’s also not surprising to see the loonie bounce when broader risk sentiment bounces," said Bregar, who expects currency traders to buy on the dip in the U.S. dollar.

In the U.S., a pause in the decline of bond yields stuck out to him 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 percent).

This report by The Canadian Press was first published July 20, 2021.

Companies in this story: (TSX:GSPTSE, TSX:CADUSD)

Salmaan Farooqui, The Canadian Press

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