TORONTO (Reuters) - Toronto’s main stock index rebounded on Wednesday in a broad-based rally following five straight days of losses that took Canadian shares to their lowest level this year.
The market took its cue from a rebound on Wall Street a day after aluminum producer Alcoa Inc (AA.N) surprised investors with a first-quarter profit, an encouraging start to earnings season.
The most influential gainer was Canadian National Railway (CNR.TO), up 2.4 percent to C$77.84, after its smaller rival Canadian Pacific Railway (CP.TO) on Tuesday forecast a four-fold increase in first-quarter earnings.
CP Railway was up 1.6 percent to C$74.40.
“We’ve been down for so many days in the last week that we’re finally due for an up day, but I still think we’re going to have some continued weakness in the markets from here,” said Arthur Salzer, chief executive officer of Northland Wealth Management.
The recent string of selloffs was prompted by a resurgence of fears about global growth, including disappointing U.S. employment data, signs of soft domestic demand in China and a flare-up of European debt jitters.
“We are getting a lot of news from Spain in regards to their banking system and their availability of money. Things look very very tight,” added Salzer.
“Although we’re comfortable with the Canadian banking system, I still think we’re in a bit of a liquidity crunch and we could have weaker markets for the next four or five weeks from here.”
The Toronto Stock Exchange’s S&P/TSX composite index .GSPTSE ended up 91.47 points, or 0.77 percent, at 12,026.76.
“Toronto is more oversold than New York at this stage,” said Ron Meisels, technical analyst and president of Phases & Cycles in Montreal.
The index broke below 12,000 in the previous session and turned slightly negative for the year. Meisels noted that 12,000 is not only a key psychological level for investors but also the 50 percent correction point between the lows of December and the highs of February. The next major support level is eyed at 11,500.
“We peaked in February, then people just got turned off when they saw that Toronto was already turning down, so a lot of people went towards New York,” added Meisels.
“But there is a ray of hope, given that we’re nearing the end of this bull move and given that Toronto usually does best in the tail end of the market.”
Bill Horton, chief investment officer at MD Physician Services, cautioned against getting too excited about the market rebound.
“The mistake might be to assume that everything is back to normal when we’re really still highly dependent on policymakers getting it right,” said Horton. “So when we see broad moves in similar directions on the same day, it means that there’s a correlation that is more reflective of the risk-on/risk-off environment we saw last year.”
In individual company news, Canada’s Dollarama (DOL.TO) shot up nearly 7 percent to C$51.70 after the dollar-store chain posted a surge in fourth-quarter profit and boosted its dividend by 22 percent.
Editing by James Dalgleish