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North American stock markets quieter after strong start to March as all eyes on bonds


TORONTO — North American stock markets were quieter Tuesday after experiencing strong gains to start March. 

"There were a lot of people this morning just shaking their head trying to figure out what direction the market's going to be and I think it's just a reminder that March is going to a volatile month," said Greg Taylor, chief investment officer of Purpose Investments. 

U.S. 10-year bond yields have stabilized in recent days since surging to a 52-week high of 1.6 per cent. That propelled the TSX to its best day in a month on Monday and lifted the S&P 500 to the strongest performance since June.

"It really felt like the market took a bit of a shock last week with the big move we had in the bond market and the weekend was really spent with people trying to figure out if that was a sign of a coming crash or correction." 

The S&P/TSX composite index closed up 121.98 points to 18,421.60 after gaining nearly 240 points to start the month.

But U.S. markets were lower, with the Dow Jones industrial average down 143.99 points at 31,391.52. The S&P 500 index was down 31.53 points at 3,870.29, while the Nasdaq composite was down 230.04 points at 13,358.79. 

Materials led the TSX, gaining 2.2 per cent on a rise in gold prices as shares of Osisko Gold Royalties Ltd. climbed 7.2 per cent.

The April gold contract was up US$10.60 at US$1,733.60 an ounce and the May copper contract was up 10.9 cents at US$4.22 a pound. 

Financials also had a decent day after the strength of last week's performance on stellar quarterly results.

"The Canadian banks put up such a good quarter across the board that I think that caused a lot of people to second-guess the business models and maybe start to allocate a little more to them," Taylor said in an interview.

Sun Life Financials was up 2.7 per cent while Laurentian Bank and Scotiabank rose 1.6 and 1.4 per cent, respectively.

Energy was also higher even though crude oil prices fell below US$60 a barrel on nervousness heading into this week's OPEC meeting over worries that the Middle East cartel and Russia will increase output.

The April crude oil contract was down 89 cents at US$59.75 per barrel and the April natural gas contract was up 6.2 cents at US$2.84 per mmBTU. 

Taylor said the energy sector has come a long way so investors are also probably taking some profits.

Whitecap Resources Inc. rose 4.5 per cent while Suncor Energy Inc. climbed two per cent in heavy trading.

The Canadian dollar traded for 79.20 cents US compared with 78.98 cents US on Monday. 

Consumer staples was up 1.2 per cent while consumer discretionary inched up slightly even though Spin Master shares surged 24 per cent after posting quarterly results.

Technology and industrials were the laggards on the TSX with shares of BlackBerry Ltd. down 4.1 per cent. 

Taylor said Canada's GDP numbers for 2020 didn't really have any impact on markets.

The Canadian economy grew 9.6 per cent in the fourth quarter, ending its worst year on record on a strong note. 

However, investors will be watching closely on Thursday to see if Federal Reserve chairman Jerome Powell has any comments about the bond volatility and if he has any motivation to "try to talk them down," Taylor said.

Friday's payroll numbers could produce another sign for bond markets.

"So really this week seems all about the bond market and seeing how it stabilizes after the volatility last week."

Observers are focused on when central banks will start to become more hawkish.

Moves after the financial crisis to normalize interest rates caused a "taper tantrum" in 2013 that prompted equities to sell off.

"There's a lot of nervousness that as things start to get better, do we see a repeat of that later this year as central banks again start to talk about taking off some programs and that could cause a taper tantrum 2.0," he said.

"That feels like the nervousness markets are trying to get prepared for, but it's probably something more in the second half of the year."

This report by The Canadian Press was first published March 2, 2021. 


Ross Marowits, The Canadian Press

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