Energy Sector Helps Lift S&P/TSX Composite Index, U.S. Equity Markets End Higher

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TORONTO — Gains in the energy sector helped Canada’s main stock index end the trading day in the green, while U.S. stock markets also closed higher, a day after posting their worst session since June 2020.

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The S&P/TSX Composite Index gained 80.74 points, closing the trading day at 19,726.14.

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In New York, the Dow Jones industrial average rose 30.12 points to 31,135.09. The S&P 500 index ended the trading day up 13.32 points at 3,946.01, while the Nasdaq composite closed up 86.11 points at 11,719.68.

The energy sector rose more than 3%, with stocks like Suncor Energy Inc., Canadian Natural Resources Ltd., Cenovus Energy Inc. and Crescent Point Energy Corp. all registered positive movements.

“Energy looks like a really good hiding place,” said Greg Taylor, chief investment officer at Purpose Investments.

“We are very fond of energy stocks. These companies have spent so much time cutting costs and operating in a really lean environment, and now that energy prices – both oil and natural gas – have gone up, they’re really generating a lot of cash flow. Treasury.

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And what these companies do with their earnings is return them to shareholders in the form of dividends and buybacks, Taylor said.

“When you look at some instabilities in other sectors, the energy sector really stands out as a nice bright spot.”

The October crude contract was up US$1.17 at US$88.48 per barrel on Wednesday and the October natural gas contract was up 83 cents at US$9.11 per mmBTU.

After a choppy Tuesday in the markets, Taylor is warning of further volatility ahead of the US Federal Reserve’s interest rate decision next week.

“Last week it was kind of an anomaly coming out of Labor Day, and I think people got complacent, and then yesterday with the US CPI number coming in, I think it’s It was kind of a sudden dose of reality for investors that the Fed isn’t going away,” he said.

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“I think now you have more people on an uncertain basis.”

While economists are still widely expecting a three-quarters percentage point increase, a full percentage point becomes a bigger possibility.

“If 100 came in, I think you’d see a big move in bond yields and a big move in the US dollar, and both would probably add a little shock to equity markets,” Taylor said.

Besides the move in interest rates next week, Taylor said the biggest risk to markets is around the upcoming earnings season starting in October.

Corporate earnings and forecasts could potentially push markets past the lows seen in June.

“At the start of the year, market multiples were a bit high and have returned to a more average level. But what we haven’t really seen is somebody cutting profits, and if people start worrying that there’s a recession or that companies can’t pass on price increases and that ‘they’re starting to cut their earnings estimates, then that combined with the already discounted multiples could lead to a (deeper) downside,’ he said.

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Eyes will be on the cryptocurrency market tomorrow with Ethereum’s merger with an eco-friendly network due to take place tonight.

“It could be a big event for crypto because if all goes well I think it could be a new breakthrough with more crypto becoming green and a bit more efficient. So it could be good for attracting more investors in space,” Taylor said.

“Contrary to that, if it doesn’t work, then we have a lot more doubts. And people will take another look at their crypto assets.

The Canadian dollar was trading at 75.95 US cents against 76.28 US cents on Tuesday.

The December gold contract was down US$8.30 at US$1,709.10 an ounce and the December copper contract was down about four cents at US$3.52 an ounce. book.

This report from The Canadian Press was first published on September 14, 2022.

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

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