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TORONTO — A surging energy sector propelled Canada's main stock index to new highs ahead of Friday's U.S. jobs report that could give the Federal Reserve the green light to begin tapering its stimulus.

Energy gained 3.3 per cent as U.S. crude oil prices hovered around US$70 and natural gas continued its climb.

The October crude oil contract was up US$1.40 at US$69.99 per barrel after surpassing US$70 in earlier trading and the October natural gas contract was up 2.6 cents at US$4.64 per mmBTU. 

Crude rose after the OPEC plus meeting failed to surprise with members agreeing to modestly raise output in the coming months. Natural gas was helped by some hurricane outages with some supply coming off. 

Parex Resources Inc. led the sector, gaining 8.2 per cent while MEG Energy Corp. and Cenovus Energy Inc. each rose about 5.9 per cent. 

"The Canadian energy stocks have been volatile through August, but there has been a nice bounce today and I think this is a sector that could be setting up for a good run into the second half of the year," said Greg Taylor, chief investment officer of Purpose Investments. 

The Canadian dollar traded for 79.54 cents US compared with 79.32 cents US on Wednesday. 

Ten of the 11 major sectors on the TSX were higher except technology, which was only slightly lower.

Industrials continued its record climb as shares of Canadian Pacific Railway Ltd. and Canadian National Railway Co. again increased in response to the U.S. regulator's decision to reject a CN voting trust for Kansas City Â鶹ÊÓƵern.

Overall, the S&P/TSX composite index gained 105.54 points to a record close of 20,795.12, after hitting an intraday peak of 20,818.42.

In New York, the Dow Jones industrial average was up 131.29 points at 35,443.82. The S&P 500 index rose 12.86 points at 4,536.95, while the Nasdaq composite was up 21.80 points at 15,331.18. Both of these markets closed at record highs. 

Trading was light ahead of the long Labour Day weekend and Friday's crucial jobs report that may be prompting investors to hold back on making some big bets, Taylor said in an interview.

"That's really, I think, going to set the tone for most of September, as much as anything, because this is a super important number that if the payroll number surprises to the upside, that could mean that the Fed has no excuses not to start tapering and taking away the stimulus," he said.

"So we're kind of in the camp now that good news on payroll could be somewhat concerning for the markets and cause some volatility in the month."

A super hot number that is well ahead of expectations will "probably put a lot of pressure on the Fed to speed up the taper and as much as they said at Jackson Hole that it'll start at the end of the year, It might be sooner than that, depending on the number tomorrow."

Economists are expecting that U.S. employers created 750,000 jobs last month, pushing the unemployment rate down to 5.2 per cent. 

However, this week's disappointing ADP employment report could signal some weakness in Friday's report that might remove some urgency for the Fed to act earlier than anticipated, he added.

Meanwhile, U.S. stock markets got lifts from first-time claims for U.S. unemployment insurance reaching the lowest level since March 2020 at the start of the COVID pandemic at 340,000.

Materials was up slightly even though gold moved lower as shares of Lithium Americas Corp. climbed 9.9 per cent.

The December gold contract was down US$4.50 at US$1,811.50 an ounce and the December copper contract was up 2.6 cents at US$4.30 a pound. 

— With files from The Associated Press.

This report by The Canadian Press was first published Sept. 2, 2021. 

Companies in this story: (TSX:CVE, TSX:MEG, TSX:PXT, TSX:CNR, TSX:CP, TSX:LCA, TSX:GSPTSE, TSX:CADUSD=X) 

Ross Marowits, The Canadian Press