North American markets moderately higher as Yellen hints at upcoming rate hike

TORONTO – North American markets were moderately higher Friday after U.S. Federal Reserve chairwoman Janet Yellen hinted at a potential interest rate hike in the coming months.

The Toronto Stock Exchange’s S&P/TSX composite index gained 56.03 points to 14,105.23, helped by a big jump in the shares of health-care giant Valeant Pharmaceuticals (TSX:VRX).

The health-care sector was the leading gainer on the TSX, up 2.05 per cent as shares of Valeant shot up 6.28 per cent, or $2.19, to $37.08.

The move came after the Wall Street Journal reported that Japanese drug company Takeda and private equity firm TPG Capital approached Valeant earlier this year to discuss a potential takeover. The report said Valeant, whose stock has dropped almost 90 per cent since mid-September amid investigations over its drug-pricing regime, rejected the offer.

Meanwhile, the heavily weighted financials sector was up 0.58 per cent following better than expected earnings results from most of the big five Canadian banks this week. Scotiabank (TSX:BNS) reports on Tuesday.

“Overall the banks had a very good earnings season,” said Laura Lau, a senior portfolio manager at Brompton Funds.

That’s despite the fact that many of them boosted their loan loss provisions as they brace for more bad news from the oilpatch.

“I think this will probably be the worst of it and it’s probably not as bad as everybody expected,” said Lau.

“I think the markets breathed a sigh of relief.”

Meanwhile, the Canadian dollar fell 0.40 of a U.S. cent to 76.70 cents US after a solid gain of slightly more than one cent over the previous two sessions.

South of the border, markets were up also up heading into the U.S. Memorial Day holiday weekend.

The Dow Jones industrial average was up 44.93 points at 17,873.22, while the broader S&P 500 rose 8.96 points to 2,099.06 and the Nasdaq added 31.74 points to 4,933.51.

“I think the Fed is priming the market for another rate increase,” said Lau, referring to Yellen’s comments that a rate hike may be coming in a matter of months, as the economy and the labour market are expected to continue improving.

“It looks like they’re saying maybe June, although I think that July probably makes more sense, because June 23 you’ll know which way the Brexit vote goes,” said Lau, referring to the referendum in Britain on possibly leaving the European Union.

In commodities, benchmark North American crude oil was down 15 cents at US$49.33 a barrel, its second consecutive small decline in a week that saw it pop above US$50 a barrel in intraday trading.

July natural gas rose two cents to US$2.17 per mmBtu, while August gold slid $6 to US$1,216.70 a troy ounce and July copper rose a penny to US$2.11 a pound.

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Note to readers: This is a corrected story. A previous version said oil declined for a third consecutive day