TORONTO — Canada's main stock index staged nearly a 10 per cent rebound on Friday as hopes rose for government stimulus to ease the economic impact of the coronavirus outbreak and a crash in oil prices.
But despite regaining some of the ground it gave up in its biggest one-day drop on record on Thursday, the market still wound up more than 15 per cent lower on the week as economists warned of a recession to come.
"Not just today, but I think this rally is not necessarily signalling an end. There could be weakness that continues," said Kevin Headland, senior investment strategist at Manulife Investment Management.
He warned that economic data gathered during the markets' recent weak period prompted by low oil prices and the spread of the COVID-19 outbreak to Europe and North America will likely continue to ripple through markets.
"I expect fundamental economic data to come out weaker over the next few months. As well, you would expect Q1 earnings also to come out weaker and the market may react negatively to any of those announcements," he said.
In choppy trading, the S&P/TSX composite index closed up 1,207.88 points or 9.6 per cent at 13,716.33, a day after giving up more than 1,700 points.
It ended the week down 2,458.69 points from its close of 16,175.02 on Friday, March 6.
Stocks surged in the United States, recouping much of their historic plunge, after President Donald Trump announced new measures on Friday to fight affects of the coronavirus.
The Dow Jones industrial average jumped 1,985 points, or 9.4 per cent, its best gain since October 2008. Stocks doubled their gains in the last half-hour as Trump made his remarks.
The S&P 500 index was up 230.38 points at 2,711.02, while the Nasdaq composite was up 673.07 points at 7,874.88.
Both the Royal Bank of Canada and CIBC warned that Canada is likely on the brink of a recession later this year as the economy is derailed by the impact of COVID-19 and a plunge in oil prices.
Both banks said economic output will likely contract in the second and third quarters.
The Canadian dollar sold off on Friday after the Bank of Canada cut its key interest rate by half a percentage point to 0.75 per cent in addition to its half a percentage point cut last week.
"We expect the Federal Reserve to cut materially next week and wouldn't be surprised to see them cut the rest of the 125 basis points and go to zero," said Headland.
"I would expect the Bank of Canada to follow suit."
He said the loonie could drift to a level lower than 70 cents US.
The Canadian dollar traded for 71.94 cents US on Friday compared with an average of 72.36 cents US on Thursday.
The S&P/TSX Capped Energy Index rose by 10.59 per cent as the April crude contract jumped 23 cents to US$31.73 per barrel and the April natural gas contract gained 2.8 cents at US$1.869 per mmBTU.
Financials, telecommunications and consumer staples sectors also posted double-digit percentage increases.
The April gold contract was down US$73.60 at US$1,516.70 an ounce and the May copper contract was down 0.85 cents at US$2.464 a pound.
This report by The Canadian Press was first published March 13, 2020.
With a file from The Associated Press.
Companies in this story: (TSX:GSPTSE, TSX:CADUSD=X)
Dan Healing, The Canadian Press
Note to readers: This is a corrected story. The previous version had a pre-closing figure for the S&P/TSX composite index.