North American stock markets rally as strong U.S. retail sales offset inflation angst

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TORONTO — North American stock markets rose Tuesday as strong U.S. economic data, including retail sales, showed high inflation was not restraining spending.

Retail consumer spending rose 0.9% in April, while sales excluding autos rose 0.6%. Industrial production rose 1.1% to also beat expectations.

“Clearly, the consumer is in a pretty good position, despite the fact that inflation continues to reduce people’s ability to spend,” said Mike Archibald, vice president and portfolio manager at AGF Investments Inc.

Markets were also helped by some weakness in the US dollar which supported risk appetite, as well as comments from Federal Reserve Chairman Jerome Powell and St. Louis Fed Chairman James Bullard. , which again suggested further 50 basis point hikes are to come in the coming months.

“I think it cements what the market was already thinking. Obviously, there have been occasional discussions of the potential for 75 basis points. I think the news you got from Bullard and Powell today would probably take that off the table, at least in future meetings,” Archibald said in an interview.

“And so I think those three things that I mentioned are really driving risk back into this market.”

The S&P/TSX Composite Index closed for a third consecutive session, gaining 284.60 points or 1.4% to 20,491.01.

In New York, the Dow Jones industrial average rose 431.17 points to 32,654.59. The S&P 500 index rose 80.84 points to 4,088.85, while the Nasdaq composite rose 321.73 points or 2.8% to 11,984.52.

Only consumer staples were down among the 11 major sectors on the TSX, while seven were up at least 1%.

The most economically sensitive sectors, including Materials, Industrials, Financials and Consumer Discretionary, were strong in Canada and a little bit in the US.

“(It’s) not uncommon to see some kind of big rebound in risk appetite for these things to happen,” Archibald said.

Health care rose 3.1%, while technology, industrials and materials each rose about 2%.

Tech rose after recent losses as the impact of upgrades to some U.S. semiconductor names had a ripple effect on longer-duration Canadian tech stocks

The shares of Dye & Durham Ltd. rose 22.4% while Hut 8 Mining Corp. grew 6.3% and Shopify Inc. grew 3.2%.

The bright outlook for United Air Lines supported the broader travel industry, including Air Canada, whose shares rose more than 4.8%.

Materials gained ground as the greenback’s weakness helped metals prices, bullion rising and copper continuing its recent rally, supporting First Quantum Minerals Ltd. up 7.2% and Teck Resources Ltd. up 5.1%.

The June gold contract rose US$4.90 to US$1,818.90 per ounce and the July copper contract rose 4.75 cents to US$4.24 per pound.

The heavy financial sector rose 1.5%, with banks and insurance companies all up.

Energy advanced despite lower crude oil prices with Birchcliff Energy Ltd. up 5.3% and Arc Resources Ltd. up 4.4%.

The June crude contract was down US$1.80 at US$112.40 per barrel and the June natural gas contract was up 34.8 cents at US$8.30 per mmBTU.

Crude prices were slightly impacted as the United States began to ease some energy sanctions against Venezuela.

Archibald said Venezuela would not make a significant difference to the world’s oil supply, but might have a small day-to-day effect.

“But I still think energy is going to stay high here and even despite the fact that oil is down about 1.5%.”

The Canadian dollar was trading at 77.92 cents US against 77.59 cents US on Monday.

This report from The Canadian Press was first published on May 17, 2022.

Companies in this story: (TSX:DND,TSX:HUT, TSX:SHOP, TSX:BIR, TSX:ARX, TSX:AC, TSX:FM, TSX:TECK.B, TSX:GSPTSE, TSX:CADUSD=X)

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