Traders work on the floor of the New York Stock Exchange Nov. 4.Brendan McDermid/Reuters
Canadian stocks slipped on Wednesday after two days of gains, as a rally in energy producers stalled and Valeant Pharmaceuticals International Inc. resumed its decline.
The pullback in equities comes amid a slide in global shares sparked by speculation the Federal Reserve may raise rates this year. Data today indicated that Canada's imports fell for the first time in five months, narrowing the nation's merchandise trade deficit for September, confirming that Canada, the world's 11th largest economy, is finding its footing after lower oil prices shocked the economy in the first half of the year.
The Standard & Poor's/TSX Composite Index fell 48.49 points, or 0.35 per cent, to 13,661.82 in Toronto. The Canadian benchmark equity gauge climbed 1.7 per cent in October, its best performance since April.
The energy sector fell 1.45 per cent after a two- day rally added 3.3 per cent, with crude in the U.S. tumbling 2.84 per cent to $46.54 a barrel.
Valeant lost 5.05 per cent after being named as the focus of a probe in the U.S. Congress.
The trade data was tempered by an announcement from the Petroleum Services Association of Canada on Tuesday that Canadian oil companies will reduce drilling activities next year as crude oil prices struggle around $50 a barrel. Canada's energy sector is a key component of its economy.
The most influential movers on the index included Concordia Healthcare Corp, rising 5.3 per cent to $39.11. CGI Group Inc rose 4.33 per cent to $53.03, while First Quantum Minerals Ltd was up 3.8 per cent to $7.65. Silver Wheaton Corp increased 0.5 per cent to $17.94 after reaching a deal to buy future silver output from Glencore Plc.
U.S. stocks also retreated from a three-month high, after data on payrolls and remarks from Federal Reserve Chair Janet Yellen lifted bets that the central bank is closer to raising interest rates.
Ms. Yellen's comment that December remains a "live possibility" for a rate increase put the brakes on a rally that had carried the Standard & Poor's 500 Index to within 1 per cent of its record. Earnings news also weighed on sentiment as disappointing results from Time Warner Inc. and 21st Century Fox Inc. sent media companies to their steepest decline since August. Energy shares followed oil lower, falling for the first time in six sessions.
The S&P 500 slipped 0.4 per cent to 2,102.47 in New York, after Tuesday reaching the highest level since July. The Dow Jones industrial average fell 49.44 points, or 0.28 per cent, to 17,868.71, while the Nasdaq Composite dropped 2.65 points, or 0.05 per cent, to 5,142.48.
"We've come back a long way since the end of September, but we're not going to go straight back to a record," said Thomas Garcia, head of equity trading at Thornburg Investment Management Inc. in Santa Fe, New Mexico. "Investors are waiting to get more data points this week to assess a potential rate hike in December. Technicals may also be playing a role in keeping us from going much higher today."
Fed Chair Yellen, speaking before the House Financial Services Committee, said an improving economy has set the stage for a December interest-rate increase if economic reports continue to assure policy makers that inflation will accelerate over time. No decision has yet been made on the timing of a rate increase, she cautioned.
Following Ms. Yellen's remarks, Fed Bank of New York President William Dudley said at press briefing he "completely" agrees with Yellen that December is "a live possibility" for liftoff on rates. Vice Chair Stanley Fischer is scheduled to speak tonight. Traders now price in a 58-per-cent chance the central bank will increase rates at its December meeting, up from 50 per cent Tuesday and 34 per cent last week before its October gathering.
As policy makers look for more progress in the labor market, a report today showed companies added 182,000 workers to payrolls in October, signaling steady improvement. Separate data showed the U.S. trade gap shrank in September to a seven-month low, while, according to another gauge, service producers unexpectedly expanded in October at the second-fastest pace in a decade.
The ADP jobs report today is a precursor to Friday's government data, in which economists forecast the economy added 182,000 jobs, with an estimated 169,000 added to private payrolls. The unemployment rate is expected to slip to 5 per cent from 5.1 per cent in September.
Some 24 members of the S&P 500 are scheduled to report earnings Thursday, including Celgene Corp., Walt Disney Co. and Kraft Heinz Co. With 80 per cent of the benchmark's companies now in the books this season, about 74 per cent have beaten earnings estimates, while only 44 per cent have topped sales forecasts. Analysts estimate profits dropped 3.9 per cent in the third quarter, up from predictions for a 6.1 per cent decline a week ago.
Crude oil futures fell 4 per cent on Wednesday, wiping out gains from the previous day's rally, as a strong dollar, tumbling gasoline prices and rising U.S. crude inventories bore down on the market.
Adding to bearish sentiment was an internal OPEC document published by Reuters that showed weaker demand in the next few years for oil from the producer group, even as Saudi Arabia pumped near record levels to protect its market share.
Brent crude futures settled down $1.96, or 3.9 per cent, at $48.58 a barrel. It had risen $1.75 on Tuesday.
U.S. crude closed down $1.58, or 3.3 per cent, at $46.32. It gained $1.76 in the previous session.
Oil had rallied on Tuesday on the back of a Brazilian oil workers strike, supply constraints in Libya and a U.S. pipeline outage.
"The bottom line is we are still well supplied," said Tariq Zahir, trader in crude oil spreads Tyche Capital Advisors in New York. "With the U.S. dollar strong on us, there are serious headwinds for crude."
U.S. crude inventories rose for the sixth consecutive week, adding 2.85 million barrels last week, in line with forecasts, despite a drop in imports to the lowest level since 1991, the U.S. Energy Information Administration (EIA) said.
With files from Reuters