A trader works on the floor of the New York Stock Exchange (NYSE) on Monday, Oct. 24Michael Nagle/Bloomberg
Canadian stocks fell on Tuesday as declines in energy producers offset gains in raw materials amid rallies in West Fraser Timber Co. Ltd. and gold miners.
The S&P/TSX Composite Index fell 0.35 per cent, or 52.38 points, to 14,870.63 in Toronto. Raw materials rebounded after snapping their longest winning streak in three months. Miners and energy producers have propelled the index to a nearly 15-per-cent increase this year, making it the top performing developed equity market in the world, ahead of the U.K. and New Zealand.
Nine of the index's 10 main groups fell, paced by a 1.7-per-cent decline in energy shares, while raw-materials producers rallied as gold rose and West Fraser Timber Co Ltd. topped earnings and revenue estimates. Gold investors weighed demand from India before its Diwali festival that can lead to increased buying, with miners rebounding from yesterday's decline. B2Gold Corp. and Iamgold Corp. rose more than 4 per cent.
Demand for gold has slipped, with the price falling more than $100 from its high this year, as traders price in increasing odds that interest rates will rise. Expectations for higher borrowing costs have strengthened the dollar, sending a gauge
Energy producers, Canada's second largest sector, retreated as oil slid below $50 a barrel on speculation that Russia won't join OPEC to curb supply and as analysts predict U.S. stockpiles climbed. NuVista Energy fell 5.1 per cent, while Canadian Energy Services and Technology Corp was down 4.7 per cent.
Financials, which account for about a third of the index, fell 0.4 per cent.
Bank of Canada Governor Stephen Poloz said Monday Canada's two-track economy complicates the decision to cut interest rates. Mr. Poloz reiterated the central bank considered cutting rates ahead of last week's decision to stand pat, but held off because of uncertainties around the nation's growth outlook. Monday, the central bank renewed a 2-per-cent inflation targeting agreement, as price increases quickened in September for the first time in five months.
Canadian stock valuations remain 17 per cent higher than their U.S. peers, with the S&P/TSX carrying a price-earnings ratio of 23.7 compared with 20.2 for the the S&P 500 Index, according to data compiled by Bloomberg.
U.S. stocks declined from a two-week high as mixed forecasts from industry giants and a slump in consumer confidence spurred concern over the outlook for the world's largest economy.
Nine out of the S&P 500 Index's 11 groups fell after blue chips including Caterpillar Inc. and 3M Co. cut their estimates, outweighing optimism with earnings at United Technologies Corp. and Procter & Gamble Co. The pound trimmed losses after Bank of England Governor Mark Carney signaled that the chances of a second interest-rate cut this year are diminishing.
Equities have struggled for direction as investors assess the likely trajectory of interest rates, the strength of corporate profits and economic data. U.S. consumer confidence declined more than forecast in October as households became less upbeat about the labor market, the New York-based Conference Board said Tuesday. More than a third of S&P 500's companies are due to post earnings this week, including Apple Inc. and Boeing Co.
"Given that we're now in the thick of earnings season, there are going to be acute reactions nearly every day," said Frank Cappelleri, executive director at Instinet LLC in New York. "Other than that, the price action is not materially different than what we've seen over the last two months. There have been multiple false starts where budding momentum has gotten cut short."
Markets around the world have seen declines in volatility, with a cross-asset gauge of price swings in equities, rates, currency and commodities down to the lowest since 2014.
While risks exist, the drop in anxiety has coincided with a reduction in uncertainty when it comes to U.S. politics and policy. Hillary Clinton's odds of victory are close to the highest on record at 86.5 per cent, according to forecaster FiveThirtyEight. Likewise, investors appear to be coming to terms with the inevitability of a Federal Reserve rate hike in December.
"Until we get something that really surprises the market, we're going to continue in this low volatility," said Hank Smith, who helps manage more than $6-billion as chief investment officer at Haverford Trust Co. in Radnor, Pa. "Neither the election nor the Fed's rate decision have people particularly worried right now."
The Dow Jones industrial average was unofficially down 53.69 points, or 0.29 per cent, at 18,169.34, the S&P 500 was down 8.17 points, or 0.38 per cent, at 2,143.16 and the Nasdaq Composite was down 26.43 points, or 0.50 per cent, at 5,283.40.
A two-day lull for European equities ended as Novartis AG led drugmakers down after saying its profit fell for a seventh straight quarter while Italian lenders slumped. The Stoxx Europe 600 Index fell 0.4 per cent, erasing an earlier advance. Miners jumped to their highest level since August 2015, tracking a rally in metal prices.
Most emerging-market stocks retreated as Brazilian consumer companies fell on prospects for a slower-than-expected reduction in borrowing costs, outweighing gains in commodity producers from South Africa to China.
Crude fell to a one-week low as speculation mounts that Russia won't join OPEC to curb supply and analysts predict U.S. stockpiles climbed.
Futures dropped 1.1 per cent in New York. Output cuts aren't "an option for us," said Russia's envoy at OPEC, Vladimir Voronkov, according to Interfax. The producer group has wanted Russia to join it in curbing shipments to support prices. U.S. crude supplies probably rose 2 million barrels last week, a Bloomberg survey showed before Energy Information Administration data Wednesday. Oil came off its lows as the dollar retreated against its peers.
Oil has fluctuated near $50 a barrel amid uncertainty about whether the Organization of Petroleum Exporting Countries can implement an accord to cut output when its members gather in November. A committee will meet this week to try to resolve differences over how much individual members should pump. Last month's OPEC deal pushed prices higher, bringing some drilling back in the U.S., which has in turn prevented crude from making new highs.
"The nonsense around the production agreement comes in and out of the market," said John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy. "It's coming out of oil today because of the Russian statements, which come after Iraq made it clear that they weren't going to make a cut."
West Texas Intermediate for December delivery slipped 56 cents to settle at $49.96 a barrel on the New York Mercantile Exchange. It's the lowest close since Oct. 17.
Brent for December settlement dropped 67 cents, or 1.3 per cent, to $50.79 a barrel on the London-based ICE Futures Europe exchange. It's the lowest close since Sept. 30. The global benchmark ended the session at an 83-cent premium to WTI.
U.S. crude supplies dropped to 468.7 million barrels in the week ended Oct. 14, the lowest since January, according to EIA data. Inventories have declined in six of the past seven weekly reports.
"The most important dynamic that's been a surprise is the drop in U.S. supplies," said Jay Hatfield, the New York-based portfolio manager of the InfraCap MLP ETF with $120-million in assets. "The OPEC agreement brought the rally forward by a few months. It was going to happen early next year because of supply and demand."
Gold rallied on speculation that demand will accelerate before the Diwali religious festival in India, the world's second-biggest buyer of the metal.
Industrial metals surged as increasing profits at Chinese steelmakers and gains in global manufacturing boosted speculation that demand will improve. Benchmark iron-ore spot prices topped $60 a metric ton for the first time since August after futures in China went limit-up amid a rally in coal.
With files from Reuters