Energy, financials lift TSX to two-week high as mood improves

Mon Jul 8, 2013 5:18pm EDT
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By John Tilak

TORONTO (Reuters) - Canada's main stock index hit a two-week high on Monday, led by higher energy and financial stocks, as optimism about the economic recovery gained momentum after Friday's U.S. jobs data and hopes for the upcoming earnings season lifted sentiment.

The market set its sights on the U.S. second-quarter earnings season, which kicked off with Alcoa Inc (AA.N: Quote) results after the closing bell on Monday, as well as the Canadian reporting season which picks up later this month.

A U.S. monthly jobs report on Friday showed better-than-expected growth in June and raised expectations that the U.S. Federal Reserve will start to dial back its stimulus program this year, reflecting growing strength in the world's largest economy.

"We are in a situation where we need to keep seeing evidence of U.S. growth, but investors also have this massive overhang of the Fed potentially tapering as soon as September," said Elvis Picardo, strategist and vice president of research at Global Securities in Vancouver.

"With the rates still at record lows, investors continue to gravitate towards sectors that have above-average yields," he added. "The Fed is a long way from tightening monetary policy," he said.

The utilities sector, one of the groups most badly hit by a spike in bond yields in recent weeks, rose more than any other major sector, climbing nearly 3 percent.

"Investors are coming around to the view that the selloff was overdone," Picardo said. "Given how attractive the yields on the sector still are, it's not surprising to see investors get back in."

The Toronto Stock Exchange's S&P/TSX composite index .GSPTSE closed up 73.96 points, or 0.61 percent, at 12,208.87, after earlier touching 12,219.84 -its highest since June 20.   Continued...

A Toronto Stock Exchange (TSX) logo is seen in Toronto November 9, 2007. REUTERS/Mark Blinch