Canada’s main stock index snapped a five-day losing streak on Friday while U.S. markets made up some of the lost ground on a recovery in tech stocks.
Despite a strong U.S. economy, many believe investors were spooked by the prospect of a series of interest rate hikes, said Allan Small, senior investment adviser with HollisWealth.
“I think this is one huge overreaction,” he said of the recent sell off.
“It’s going to take a bunch of trading days for us to make back what the losses have added up to over the past few days.”
The S&P/TSX composite index closed up 97.16 points to 15,414.29 after shedding 754.92 points between Oct. 4 and Thursday. The market hit a high of 15,470.88 on the day with 289.3 million shares traded.
The health care sector led, rising 4.24% with a big push from cannabis producer Canopy Growth Corp. Ten of the market’s 13 sectors increased, while gold, materials and base metals were down slightly.
The latest sell off was smaller than the one earlier this year and Small said it could have been affected by seasonality, with markets typically falling in October, and computer algorithms that triggered selling in afternoon sessions.
“I think that this again will subside and I think the market will bounce higher. Hopefully earnings season will be the catalyst for that,” he said.
Still, Small expects companies will begin to note that tariffs are starting to eat into corporate profits.
In New York, the Dow Jones industrial average gained 287.16 points to 25,339.99 after shedding 1,377.74 points in the last two days. The S&P 500 index was up 38.76 points at 2,767.13, while the Nasdaq composite rose 167.83 points to 7,496.89.
Small said people have gotten too accustomed to seeing their portfolios consistently rise and were lulled into a false sense of security.
“I think investors in my opinion were starting to get a little bit greedy. They weren’t happy with the 6%, 7%, 8%, 9% rate of return. They were chasing the hot investment, the hot technology stock, or cannabis stock.”
The Canadian dollar traded at an average of US76.74¢ compared with an average of US76.70¢ on Thursday.
The November crude contract was up US37¢ at US$71.34 per barrel and the November natural gas contract was down US6.1¢ at US$3.16 per mmBTU.
The December gold contract was down US$5.60 at US$1,222 an ounce and the December copper contract was up 0.25 of a cent at US$2.80 a pound.