TORONTO — A record surge in crude oil prices pushed Canada's main stock index higher after some recent extreme volatility in response to COVID-19.
Oil prices rose by more than 24 per cent, the largest percentage gain ever, on hope that Saudi Arabia and Russia will settle the price war that has contributed to prices plummeting to an 18-year low. Prices have also been hit by waning demand as many countries are in a lock-down to contain the novel coronavirus.
The May crude contract was up US$5.08 at US$25.91 per barrel and the April natural gas contract was up five cents at US$1.65 per mmBTU.
Oil prices have partially recovered from recent losses after being really oversold, said Greg Taylor, chief investment officer of Purpose Investments.
"It got aggressively sold down so much yesterday that it had to bounce back some," he said in an interview.
Still, oil futures are about half of what they were at the end of February, when they were more than US$50 per barrel.
Taylor said prices could fall again as storage facilities fill but the collapse would be easier to fix if the price war is resolved, because not many companies — or countries — are making any money at these levels.
"I think most of the bounce today is more optimism on the supply side, that potentially the Saudis could figure out that they are destroying the market through this and they're hurting themselves."
After initially dropping about three per cent, the S&P/TSX composite index closed up 449.10 points or 3.8 per cent at 12,170.52.
In New York, the Dow Jones industrial average was up 188.27 points at 20,087.19. The S&P 500 index was up 11.29 points at 2,409.39, while the Nasdaq composite was up 160.73 points at 7,150.58.
Taylor said sentiment was a lot better and more orderly than Wednesday.
"Talking to traders, people just feel a little better with the market, that things had gone too far and it's time to start putting some money to work," he said, adding that the tricky part is calling big sentiment changes.
"And that feels like what's happened in the last 24 hours."
The swift decrease suggests the market could be setting up for a snapback once things stabilize even though a global recession is widely expected, he added.
"If this is something that does prove to be a one- or two-month slowdown by the end of the year we could be looking at an economy that's got a ton of stimulus, a lot of growth going with central banks keeping the rates low, the market could rebound quickly."
The Canadian dollar traded for 68.99 cents US compared with an average of 68.98 cents US on Wednesday.
All 11 major sectors on the TSX moved higher, led by health care, consumer discretionary, telecommunications and energy.
Health care gained 9.5 per cent as shares of cannabis company Hexo Corp. surged 55.8 per cent while drugmaker Bausch Health Companies Ltd. rose 13 per cent.
The rise in energy prices helped the sector with Arc Resources Ltd. up 18.7 per cent and Imperial Oil 17.4 per cent higher.
Materials also gained with forest company Interfor up 24 per cent and Teck Resources Ltd. up 21 per cent.
The April gold contract was up US$1.40 at US$1,479.30 an ounce and the May copper contract was up 3.45 cents at US$2.19 a pound.
Although it's impossible to time the market, Taylor said it's probably not a bad time for people with cash to begin investing in the market.
"I'm not saying put everything in right now but it's certainly time to start at least allocating some of that cash because we don't know when the bottom's going to be but it also could also come at us quite quickly if news starts getting better in the next few days."
With interest rates at virtually zero, investors seeking income should look at large-cap equities such as banks and pipelines with good, stable dividends.
Technologies are also a great opportunity as the number of people working remotely has reinforced the need for additional spending in the sector.
"People are realizing that the tech spend is not going away ...all of these systems I think are really going to become in the mainstream as we've all had to experience and utilize them more over the last few weeks."
This report by The Canadian Press was first published March 19, 2020.
Companies in this story: (TSX:BHC, TSX:HEXO, TSX:ARX, TSX:IMO, TSX:IFP, TSX:TECK.B, TSX:GSPTSE, TSX:CADUSD=X)
Ross Marowits, The Canadian Press