(Bloomberg) — Canada’s stock market surged for a second day, putting it on the cusp of a bull market, as investors saw hope that government spending plans will bolster a global economy hit by the coronavirus pandemic.
The S&P/TSX Composite Index closed 4.5% higher, posting its first back-to-back gains since Feb. 20, the day the market peaked. The head-spinning rebound happened as Justin Trudeau’s government won support in the House of Commons for his stimulus deal and the U.S. Senate moved toward a vote on a $2 trillion package of spending and tax breaks.
“Canadian stocks are surging higher as fiscal stimulus measures across the globe get finalized and as some investors see the light at the end of the pandemic tunnel,” said Ed Moya, a senior market analyst at Oanda Corp. in New York.
Read more: Trudeau Rushes to Deliver Crisis Relief Under New Program
With a 17% rise in two days, the S&P/TSX Composite is 335 points or 2.5% away from crossing 13,474.19, the level that would signal a new bull market, which is defined as a 20% rise. That would be a dramatic turn of events for a market that sank to the lowest level since 2011 only on Monday.
Moya said investors should stay cautious. “Last week, panic selling seemed to have ended, but if history of past crashes holds true, investors should not be surprised if we see the majority of this two-day rally erased,” he said.
The economic hit of the coronavirus fallout in North America is only now starting to show. Last week, 929,000 Canadians applied for unemployment benefits and two new surveys suggested the economic pain is just beginning. The pandemic-induced shutdown of the economy has resulted in job loss or reduced work hours for 44% of Canadian households, the Angus Reid Institute said Wednesday.
The Canadian Federation of Independent Business also reported that small business confidence in Canada collapsed in March to the lowest level on record. The confidence index fell to 30.8, from 60.5 in February, and widespread declines are seen in every province and industry.
And while the benchmark’s winning streak has helped investors recoup some losses from the rout, it’s still down about 27% from its Feb. 20 record high.
Markets will bounce back eventually, said Alicia Levine, chief strategist at BNY Mellon Investment Management.
“Ultimately the stimulus will support the economy when we get to the other side of this,” she said on BNN Bloomberg. “The reality is that we all understand that all of our societies and economies have to be under lockdown for a while simultaneously to get through it.”
The loonie strengthened 1.9% to C$1.4194 per U.S. dollar and the yield on 10-year federal government debt climbed to 0.89%.
(Updates with closing prices.)
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