Specialist Frank Masiello, left, and trader Tommy Kalikas work on the floor of the New York Stock Exchange, Wednesday, Dec. 2.Richard Drew/The Associated Press
Canadian stocks fell on Wednesday, halting the best two- day advance in two months, as oil led a selloff in commodities prices.
Energy producers dropped 3.6 per cent as a group to lead equities lower. Oil dropped to six-year low in London on signs of discord in the Organization of Petroleum Exporting Countries as ministers arrive in Vienna for a meeting.
The Bloomberg Commodity Index, a measure of commodities prices from crude to copper, traded at a 1999 low as the measure declined a third time in four days. The gauge has tumbled 22 per cent this year, the worst performance since 2008 and headed for a fifth annual retreat.
The Standard & Poor's/TSX Composite Index fell 172.24 points, or 1.26 per cent, to 13,463.82 in Toronto, after a two-day rally of 2 per cent. All 10 of the index's main groups finished in negative territory.
The benchmark equity gauge has dropped 7.3 per cent this year, trailed only by Singapore and Greece among developed markets.
The Bank of Canada kept its key interest rate unchanged at 0.5 per cent, where it's been since July. All 33 economists in a Bloomberg survey predicted no move. The Canadian economy is undergoing a "complex and lengthy adjustment" as non-energy exports and the weaker currency help to contain the damage from lower oil prices, Governor Stephen Poloz said in a statement.
Royal Bank of Canada fell 0.01 per cent. Fiscal fourth- quarter profit rose 11 per cent as a jump in trading revenue and a lower tax rate helped counter slowing earnings growth from Canadian banking and declines across other key businesses.
National Bank of Canada fell 0.45 per cent after raising its dividend 3.8 per cent amid an increase in fourth-quarter profit. Toronto-Dominion Bank, Canadian Imperial Bank of Commerce and Canadian Western Bank report Thursday. A gauge of the nation's largest lenders has lost 3.6 per cent this year, on track for the first annual decline since 2011.
Energy and raw-materials producers, which account for about 30 per cent of the index, have each slumped more than 20 per cent this year and are the worst-performing industries in the S&P/TSX.
A combination of slowing economic growth in China and a rally in the U.S. dollar with impending interest-rate increases from the Federal Reserve as soon as Dec. 16 have crimped commodities prices this year.
The most influential weights on the index included Suncor Energy Inc, which fell 2.7 per cent and Canadian Natural Resources, which declined 4.2 per cent.
Barrick Gold Corp fell 2.6 per cent and Goldcorp Inc. declined 2.7 per cent, outpacing a 0.9-per-cent slip in gold futures to $1,053.8 an ounce.
Hydro One Ltd., which went public last month in Canada's largest initial stock offering in 15 years, slumped after a provincial auditor's report warned the power utility's transmission system was increasingly unreliable and will cost the province billions to fix.
Shares of Hydro One dropped 3.9 per cent to $21.95, compared with the company's initial offering price of $20.50. The stock debuted at $21.50 a share Nov. 5.
U.S. stocks fell as tumbling oil prices sparked a broader sell-off in equities, while Federal Reserve Chair Janet Yellen signalled increased confidence in the economy, laying the groundwork for a December interest-rate increase.
Equities continued a pattern of alternating between gains and losses that led the S&P 500 in November to its narrowest monthly move in six years. Energy producers dropped the most in two months as crude fell below $40 a barrel for the first time since August, and raw-material shares had their biggest slide in three weeks. Technology companies erased early gains as Qualcomm Inc. and Yahoo! Inc. trimmed their rallies.
The Standard & Poor's 500 Index declined 1.1 per cent to 2,079.67 in New York, reversing Tuesday's 1.1-per-cent rally to open the month. The Dow Jones industrial average fell 158.67 points, or 0.89 per cent, to 17,729.68, while the Nasdaq Composite dropped 33.08 points, or 0.64 per cent, to 5,123.22.
"Yellen didn't say anything miraculous that's pushing the market down," said Yousef Abbasi, global market strategist at JonesTrading Institutional Services LLC in New York. "We floated up yesterday really on just air and seasonality dictating that December is a higher month. With the combination of the meltdown in commodities we're seeing today, the Euro CPI number sending the U.S. dollar higher, the data with regard to employment and Yellen's tone, reality is setting in here."
The S&P 500 extended losses in afternoon trading as crude's decline accelerated before an OPEC meeting Friday. As three days of economic events likely to set the course for global markets into 2016 kicked off, traders' focus on diverging monetary policies was diverted by a renewed rout in crude as OPEC has shown few signs it will vote to trim output.
In a speech delivered at the Economic Club of Washington, Fed Chair Yellen said she's increasingly confident that the economy is growing sufficiently to achieve labour-market improvement and higher inflation. She also warned that waiting too long to end the era of near-zero interest rates could force the central bank to tighten too quickly, which would risk disrupting financial markets and the six-year expansion.
Fed officials have been trying to gauge whether the economy is headed toward their goals and can sustain growth as rates increase. Ms. Yellen is scheduled to testify on the outlook before Congress's Joint Economic Committee tomorrow. Atlanta Fed President Dennis Lockhart said earlier Wednesday he favours raising rates this month, absent any information that "drastically" changes the economic outlook. San Francisco Fed President John Williams joined Ms. Yellen in warning of risks in delaying liftoff.
In a speech Tuesday night, Fed Governor Lael Brainard urged her colleagues at the central bank to move cautiously as they raised rates and to expect the Fed's benchmark to top out at a lower level than in previous economic expansions. Traders are pricing in 74 percent odds the Fed will liftoff when its next two-day meeting concludes on Dec. 16.
Meanwhile, major central bank policies are set to diverge as European Central Bank President Mario Draghi has been priming markets for action since October. Economists surveyed by Bloomberg unanimously predict the ECB will boost stimulus again at its meeting tomorrow, while the bank is less than halfway through a 1.1 trillion-euro ($1.2-trillion U.S.) bond-buying program.
Before the government's jobs report on Friday, data showed U.S. private payrolls grew more than expected, with companies adding 217,000 workers in November in a sign the labor market continues to strengthen. The Fed's Beige Book survey said the economy expanded modestly across most of the U.S. in October and November amid rising consumer spending.
Oil has slumped about 40 per cent since Saudi Arabia led OPEC's decision a year ago to maintain output and defend market share against higher-cost shale producers. Saudi Arabia will consider all issues at the Friday gathering, Oil Minister Ali al-Naimi said. Iranian Oil Minister Bijan Namdar Zanganeh sent a letter to the group calling for a cut in excess supply, causing a brief rise in the oil market Wednesday.
Brent for January settlement fell $1.95, or 4.4 per cent, to $42.49 a barrel on the London-based ICE Futures Europe exchange. It's the lowest close since March 2009. Futures are down more than 20 per cent from their closing high on Aug. 31, meeting the common definition of a bear market. Total volume was 36 per cent above the 100-day average in New York.
West Texas Intermediate crude for January delivery dropped $1.91, or 4.6 per cent, to settle at $39.94 a barrel on the New York Mercantile Exchange. It's the lowest close since Aug. 26. The U.S. benchmark crude closed at a $2.55 discount to Brent.
Saudi Arabian Oil Co. lowered its official selling price for all grades to the U.S., according to an e-mailed statement from the company Wednesday. In Asia, the discount for its Arab Light against a regional benchmark will be $1.40 a barrel, compared with $1.30 in December.
OPEC's 12 members have pumped more than their collective production target of 30 million barrels a day the past 18 months, data compiled by Bloomberg show. Venezuela will propose a 5-per-cent production cut at this week's meeting, state newspaper Correo Del Orinoco reported, citing President Nicolas Maduro.
"The reaction to the Iranian headlines shows how nervous the oil market is," Tim Evans, an energy analyst at Citi Futures Perspective in New York, said by phone. "This confirms that there's a divide in OPEC. The majority of members are in favour of a cut, but the members in the strongest position to make a cut aren't a part of that group."
With files from Reuters