The close: Markets rise with economic hopes; RBC reclaims top spot as Canada’s most valued stock

27 May 2020, 08:47 by Darcy Keith

U.S. stocks rose on Wednesday, with the S&P 500 closing above 3,000 for the first time since March 5, as the further easing of lockdowns lifted optimism for an economic recovery.

Bank stocks powered the day’s advance, with the S&P 500 financial index leading gains among S&P 500 sectors.

Canadian stocks also rose, fueled similarly by financial stocks - with that sector gaining 3.19% even as Royal Bank of Canada and Bank of Montreal missed Street expectations for second quarter profits. Royal Bank rose 4.79%, giving it a market cap of $131.36 billion - enough to retake the crown as Canada’s most valued stock as Shopify lost 2.37%.

Alternative lenders in Canada also had a strong session, with Home Capital gaining 10.74% and Equitable Group 8.28%. National Bank rose 7.13% after reporting generally better than expected quarterly results after the Bell on Tuesday, prompting several analysts to hike their price targets.

Air Canada lost nearly 7 per cent after revealing plans for issuing more shares and debt.

Shares of JPMorgan Chase & Co jumped for a second day and led the gains in the S&P 500 financial index. The bank’s chief executive, Jamie Dimon, said Tuesday he expects JPMorgan will boost its credit reserves again in the second quarter, but said there are signs the economy is regaining its footing.

Continued easing of lockdowns, optimism about an eventual COVID-19 vaccine and massive U.S. stimulus have been driving the market’s recent gains.

“It’s all about liquidity and the hopes that the economy will eventually do well,” said Peter Cardillo, chief market economist at Spartan Capital Securities in New York.

“The rally will continue, but I don’t think it will continue without pullbacks,” he said, noting that weak second-quarter earnings could give investors a “reality check.”

Tech-related shares underperformed the broader market on Wednesday after leading the recent rally.

Unofficially, the Dow Jones Industrial Average rose 553.16 points, or 2.21%, to 25,548.27, the S&P 500 gained 44.36 points, or 1.48%, to 3,036.13 and the Nasdaq Composite added 72.14 points, or 0.77%, to 9,412.36.

But amid the recent gains, U.S. tensions with China have cast a cloud on markets.

President Donald Trump said Tuesday that Washington would announce its response to China’s planned national security legislation on Hong Kong before the end of the week. U.S. Secretary of State Mike Pompeo said Wednesday that Hong Kong no longer warrants special treatment under U.S. law as it did when it was under British rule, potentially a big blow to its status as a major financial hub.

Tech stock are among the most sensitive to Chinese growth, said Sameer Samana, senior global market strategist at Wells Fargo Investment Institute in St. Louis.

“If the market is going to go higher from here, you’re going to have to have broader participation, but you are going to need those large-cap tech companies to be along for the ride, because they make up such a large portion of the benchmark,” Samana said.

Also on Wednesday, a Federal Reserve report showed that U.S. businesses continued to be hammered by the effects of the novel coronavirus epidemic into the middle of May.

The S&P/TSX composite index closed up 123.91 points at 15,272.03, the highest level since March 6.

The July crude contract was down US$1.54 at US$32.81 per barrel and the July natural gas contract was down 5.9 cents at nearly US$1.89 per mmBTU.

The August gold contract was down US$1.40 at US$1,726.80 an ounce and the July copper contract was down 3.65 cents at US$2.38 a pound.

Reuters, The Canadian Press, and Globe staff

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