Photo: The Canadian Press

TORONTO — A rising energy sector supported Canada’s main stock index in a continued recovery from last week’s brutal performance while U.S. stock markets returned from a holiday to bounce back even stronger after their worst week since the pandemic.

Pierre Cléroux, chief economist for the Business Development Bank of Canada, said the improvement started Monday with positive moves in Europe that U.S. markets were unable to take advantage of because they were closed for Juneteenth.

“So today, I think it’s just investors are taking advantage of low share prices because of the significant drop over last week,” he said.

U.S. President Joe Biden’s comments that a recession wasn’t inevitable was also seen as positive.

But Cléroux doesn’t think these gains have legs amid a high level of volatility.

“I don’t think we are at the bottom yet. There’s still a lot of uncertainty about interest rates increasing, there’s a lot of talk about recession, so I don’t think it’s over,” he said.

While markets are likely close to the bottom, he said, it will still take some time for a total rebound. That could be dependent on positive inflation numbers that demonstrate higher interest rates are working.

However, Wednesday’s inflation numbers for May are not expected to be good. And if central banks are unable to stabilize inflation, rates will have to rise in a bigger way.

“That’s why the market is so worried about. So I think that we need more positive news before to see a full rebound.”

Investors fear that higher interest rates will slow economic growth too much and prompt a recession.

The S&P/TSX composite index closed up 73.66 points to 19,257.29 after gaining 253 points to start the week. The Toronto market had plunged 6.6% last week in its worst performance in more than two years

In New York, the Dow Jones industrial average was up 641.47 points at 30,530.25. The S&P 500 index was up 89.95 points at 3,764.79, while the Nasdaq composite was up 270.95 points at 11,069.30.

The Canadian dollar traded for 77.35 cents US compared with 76.96 cents US on Monday.