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Equities
Canada’s main stock index touched a three-week low in early trading Thursday with the continued decline in crude prices hitting energy shares. Wall Street’s key indexes also saw early selling pressure on suggestions the Federal Reserve could start pulling back stimulus this year.
Just after the opening bell, the Toronto Stock Exchange’s S&P/TSX composite index was down 103.9 points, or 0.51 per cent, at 20,198.21.
In the U.S., the Dow Jones Industrial Average fell 86.02 points, or 0.25 per cent, at the open to 34,874.67.
The S&P 500 opened lower by 17.83 points, or 0.41 per cent, at 4,382.44. The Nasdaq Composite dropped 102.75 points, or 0.71 per cent, to 14,423.16 at the opening bell.
In the minutes from the July meeting, the Fed signalled plans to start pulling back on its easy-month policies later this year. The minutes suggested that most Fed officials felt recent strength in the employment market could justify curbing asset purchases this year. However, some also indicated they still want to see more evidence of strength in the U.S. jobs market before embarking on the policy shift.
“The minutes certainly don’t alter the expectation that a taper is on its way, its accepted wisdom now that discussions on a taper are likely to start soon, with a slowdown in purchases starting sometime in Q4, despite concerns about some weakness in the more recent data, particularly retail sales and consumer confidence,” Michael Hewson, chief market analyst with CMC Markets U.K., said.
Investors will now turn their attention to the Jackson Hole symposium later this month, looking for further indications from Fed chair Jerome Powell on the potential timing on any policy change.
Before the start of trading, markets got a better-than-expected reading on U.S. jobless claims. The U.S. Labor Department said initial claims for state unemployment benefits fell to 348,000 last week. Economists had been expecting to see a number closer to 365,000. The latest reading marks the fourth consecutive weekly decline and represents the lowest level since March 2020.
On the corporate side, shares of trading app owner Robinhood Markets Inc. fell more than 9 per cent in early trading after the company, in its first earnings report since going public, posted net revenue of US$565-million for the quarter ended June 30 compared with US$244-million a year earlier. Analysts had been looking for revenue of US$521,8-million in the latest quarter. However, the company also indicated that it expects investors to become less active in the third quarter, weighing on the stock. The results were released after Wednesday’s close.
The Globe’s Andrew Willis reports that one of Canada’s largest retirement home operators, Sienna Senior Living Inc., is awarding $3-million of shares to its 13,000 employees to recognize their work in COVID-19 pandemic and foster a sense of ownership in the company. On Thursday, Markham-based Sienna announced all full-time workers who have been in the ranks for more than a year will receive $500 in stock, while part-time workers will get $300 in shares. Employees will need to hold their shares in the Toronto Stock Exchange-listed company for a minimum of six months.
Overseas, the pan-European STOXX 600 was down 1.55 per cent by afternoon. Britain’s FTSE 100 slid 1.43 per cent. Germany’s DAX and France’s CAC 40 fell 1.43 per cent and 2.10 per cent.
In Asia, Japan’s Nikkei finished down 1.1 per cent. Hong Kong’s Hang Seng closed down 2.13 per cent.
Commodities
Crude prices fell, with Brent hitting its lowest since May, on a higher U.S. dollar and continued concerns about the impact of the spread of the Delta variant.
The day range on Brent so far is US$65.90 and US$67.64. The range on West Texas Intermediate is US$62.86 and US$64.76.
Both benchmarks are now down for six consecutive sessions. That’s the longest losing streak since early 2020.
“There are still too many question marks over the crude demand outlook over the next few months and that will weigh on crude prices,” OANDA senior analyst Ed Moya said.
“The return to the office no longer seems like a certainty and delays in approving vaccines for younger children will likely mean inconsistent demand as the school year starts.”
Sentiment also took a hit after the U.S. Energy Information Administration said gasoline inventories rose last week, fuelling concerns over waning demand. Crude inventories, however, declined.
“The weekly EIA report was a mixed bag as the headline draw of 3.2 million barrels was larger than expected, gasoline demand weakened, jet fuel improved slightly, and production rose to 11.4 million bpd,” Mr. Moya said.
In other commodities, a higher U.S. dollar also weighed on gold prices.
Spot gold was down 0.5 per cent at US$1,778.66 per ounce. U.S. gold futures eased 0.2 per cent to US$1,780.70.
Currencies
The Canadian dollar fell, sitting near the mid-78-US-cent mark, as risk sentiment weakened and its U.S. counterpart rose to nine-month high against a basket of currencies.
The day range on the loonie is 78.29 US cents to 79.09 US cents.
“The CAD neared its lows of July as it tracks the broadly stronger dollar and the 3%+ decline in crude oil prices with the fragile commodities and risk backdrop likely to continue to weigh on the currency in the near term,” Shaun Osborne, chief FX strategist with Scotiabank, said.
There were no major Canadian economic releases due Thursday. On Friday, markets will get May retail sales figures. Economists are expecting to see a solid rebound as the economy reopened.
On global markets, the U.S. dollar index, which measures the U.S. currency against six rivals, extended gains in early London trading to rise 0.3 per cent to its highest levels since Nov. 5, 2020, at 93.434, according to figures from Reuters.
The euro fell as low as US$1.16655 for the first time since Nov. 4, while the U.S. dollar rose as high as 110.225 against the yen.
More company news
Nvidia Corp forecast third-quarter revenue above Wall Street expectations on Wednesday as it benefits from a boom in demand for its chips used in data centers and gaming devices. The company estimated current-quarter revenue to be $6.80-billion, plus or minus 2%. Analysts on average had expected $6.53-billion, according to IBES data from Refinitiv.
Macy’s Inc raised its full-year revenue forecast on Thursday, as vaccinations encourage more U.S. shoppers to return to its department stores to buy apparel and footwear. The U.S. department store chain said it expects full-year net sales of $23.55-billion to $23.95-billion, compared with a previous forecast of $21.73-billion to $22.23-billion.
Facebook Inc launched a test of a new virtual-reality remote work app where users of the company’s Oculus Quest 2 headsets can hold meetings as avatar versions of themselves. The beta test of Facebook’s Horizon Workrooms app comes as many companies continue to work from home after the COVID-19 pandemic shut down physical workspaces and as a new variant is sweeping across the globe.
Economic news
(8:30 a.m. ET) Canada’s household and mortgage credit for June
(8:30 a.m. ET) U.S. initial jobless claims for week of Aug. 14.
(10 a.m. ET) U.S. leading indicator for July.
With Reuters and The Canadian Press