Business

TSX rallies, while New York stocks head lower before late-day bounce

A day after Wednesday's dramatic rise, New York stock markets reversed course and headed downwards amid uncertainty over trade and U.S. growth, then had another change of direction in the final hour of trading and ended in positive territory.

Canadian and U.S. markets both lost ground this year amid political uncertainty

The Toronto Stock Exchange was closed for Boxing Day as stocks rallied in New York on Wednesday. The TSX was moving upward on Thursday. (Chris Helgren/Reuters)

A day after Wednesday's dramatic rise, New York stock markets reversed course and headed downwards amid uncertainty over trade and U.S. growth, then had another change of direction in the final hour of trading and ended in positive territory. 

The TSX index, which missed Wednesday's rally because it was the Boxing Day holiday in Toronto, rose on Thursday. It finished the day up 385 points, or 2.8 per cent, at 14,165.

After gaining 1,000 points or five per cent in Wednesday, New York's Dow index fell as much as 500 points on Thursday. Then, in the final hour of trading, investors took heart and the index climbed 260 points to 23,138.

The broader S&P index increased 21 points to 2,488, and the Nasdaq was up 25 points at 6,579. Technology and consumer stocks have been on a wild ride, rising in the Wednesday rally on news of strong retail spending over Christmas, then losing ground before regaining it again.

The Canadian dollar ended the day down a quarter of a cent to 73.4 cents US.  The loonie was weighed down by oil prices, which were continuing their slide begun in September.

The benchmark North American contract fell 60 cents to $45.69 US a barrel because of fears of oversupply of oil and a slowdown in global growth.

Western Canada Select is down $1.44 a barrel to $28.28 US, after a background report for the National Energy Board found that western Canadian oil production outstripped export pipeline capacity by about 365,000 barrels per day.

Stocks have been falling for the last two weeks because of a muddled trade outlook and a perception that the U.S. bull run in stocks has reached its peak.

The reason for the bounce later in the day was less clear, though analysts pointed out there has been no economic bad news to justify the recent plunge.

The U.S. Fed has hiked its key interest rate four times in the last year, which could put a squeeze on business investment, and it moderated its outlook for 2019, saying it foresees only two rate hikes ahead because U.S. economic growth will slow.

President Donald Trump helped heighten the uncertainty over the U.S. economy, lashing out at his central bank over raising rates and expressing a lack of faith in its leadership. Central banks are supposed to operate independently of political factors.

Tariffs, shutdown

Then, early this week, Treasury Secretary Steven Mnuchin confused investors with a statement about U.S. bank liquidity, at a time when no one else was thinking there was any problem with banking health.

Complicating the picture are a tariff war between the U.S. and China, temporarily on hold, and a U.S. government shutdown, as Trump refused to pass a bill for government funding unless it included $5.7 billion for a wall on the Mexican border.

The mounting anxiety resulted in a five-day losing streak in New York. The Dow is now off nine per cent on the year, even after Wednesday's gain.

The TSX never enjoyed the huge run-up seen in the U.S. and has been declining since September. It is down 13.6 per cent on the year, and trading at a level last seen in mid-2016.

Analysts say the uncertainty is likely to extend into the New Year — as the uncertainty in Washington continues.