Market week: Stocks post strong gains
Positive economic fundamentals buoy markets
The main North American stock indexes made gains on the week, as investors reacted to strengthening manufacturing data and U.S. President Joe Biden’s massive US$2.3 trillion infrastructure plan announced on Wednesday. The U.S. Institute for Supply Management’s manufacturing index rose to 64.7 for March, from 60.8 in February, its highest reading since 1983. Any reading above 50 indicates expansion in the sector. Meanwhile, Biden’s infrastructure plan follows just three weeks after he signed a US$1.9 trillion Covid relief bill into law.
While investors cheered the manufacturing data and the apparently bottomless fiscal support, enthusiasm was dampened somewhat by tax changes proposed concurrently by President Biden, including a seven percentage point increase in the corporate tax rate, to 28% from 21%. In addition, investors kept a wary eye on the threat of inflation, given the continuing ultra-loose monetary policy, including near-zero policy interest rates, by the Federal Reserve Board and the multi-trillion dollar fiscal handouts enacted by the Biden Administration and the Democrat-controlled Congress.
The S&P 500 Composite Index gained 1.1% on the week, for a 4.2% advance in March, and an 11.7% surge in the first quarter, with cyclical stocks leading the gains as investors anticipate the fading Covid-19 threat and stronger growth over the coming quarters. The Nasdaq Composite Index rose 4.6% on the week, as tech shares made something of a comeback after a period of retreat. However, that still left the Nasdaq with a 0.4% gain in March, but helped propel the index to a 15.4% advance in the first quarter.
The news that the OPEC+ nations agreed to ease production cuts helped Toronto’s resource-weighted S&P/TSX Composite Index to a 1.3% weekly gain, as the price of crude oil rose 0.9% on the week. In addition Markit’s Manufacturing Index for Canada showed record growth for March, rising to 58.5 from 54.8 in February, the strongest in the index’s 10-year history according to a Markit economist. Investor sentiment was also buoyed by a report from Statistics Canada that the value of building permits in February rose to $10.15 billion, crossing the $10 billion threshold for the first time. The S&P/TSX Composite rose 3.6% in March, gaining 7.3% in the first quarter.
* Harvest space ETF blasts off. Harvest Portfolios Group Inc. announced on April 1 that its Harvest Space Innovation Index ETF (TSX: ORBT) has started trading on the TSX. The ETF is designed to provide Canadian investors access to the space industry sector by tracking the the Solactive Space Innovation Index of large-cap companies engaged in the development satellites, space probes, space launches, space flight and tourism, space stations and habitats, and other space exploration-related endeavours.
* Dynamic launches two new active ETFs. Dynamic Funds announced on March 31 the debut of two additions to its Active ETF line-up:
Dynamic Active International ETF (TSX: DXIF) invests primarily in a broadly diversified portfolio of equity securities of businesses located around the world, excluding the U.S. and Canada. The fund is managed by veteran Dynamic managers David Fingold and Peter Rozenberg.
Dynamic Active Retirement Income+ ETF (TSX: DXR) aims for total returns that have lower correlations to major stock or bond market by investing primarily in dividend-paying or distribution-paying equities. The fund will use alternative investment strategies, including the use of modest leverage, primarily created through the use of borrowing. It is managed by another Dynamic veteran, Oscar Belaiche.
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