Major stock indexes slid and defensive investments posted gains amid fears about an uneven economic recovery in the United States and the continuing spread of the Delta coronavirus variant.
Canadian stocks extended losses for the fourth straight session on Tuesday, with the main TSX index hitting a one-week low as domestic and global economic data raised concerns about a slowing recovery.
The Toronto Stock Exchange’s S&P/TSX composite index was unofficially down 119.83 points, or 0.59%, at 20,363.59.
Losses were broad-based, with healthcare, industrial, consumer discretionary and materials sectors all falling between 0.6% and 1.4%.
The Canadian dollar on Tuesday weakened to its lowest level in nearly four weeks against the greenback, as risk aversion weighed on global financial markets and a key technical level for the currency was breached.
The loonie was trading 0.4% lower at 1.2625 to the greenback, or 79.21 U.S. cents, after touching its weakest since July 21 at 1.2648.
“Risk-off conditions, along with softer oil prices have weighed on the CAD,” Ronald Simpson, managing director, global currency analysis at Action Economics, said in a note
Meanwhile, commodity prices remained under pressure as investors feared a hit to demand due to a spike in COVID-19 cases in the United States and several Asian economies.
“With the resurgence of COVID around the world, especially in the United States and even to a lesser degree in Canada, we’re seeing the reopening stocks start to pull back,” said Allan Small, senior investment adviser at Allan Small Financial Group.
“This whole notion of reopening trade is being called into question.”
Data showed Canadian housing starts fell 3.2% in July, compared with the previous month, as a drop in multiple urban starts outweighed an increase in single-detached urban ones.
On investors’ radar will be the domestic inflation data due on Wednesday, which will be perused for clues on the Bank of Canada’s policy outlook.
Hopes of a steady economic recovery and strength in corporate earnings pushed Toronto stocks to record highs just last week, with energy and financial stocks among the biggest drivers this year.
Wall Street’s main indexes slid on Tuesday, weighed down by a drop in U.S. retail sales that raised concerns about the economic recovery, as well as by disappointing results from Home Depot.
Almost all of the S&P 500′s sectors were lower, with consumer discretionary the weakest performer.
Home Depot shares fell sharply after the company’s U.S. same-store sales fell short of estimates for the first time in nearly two years as pandemic-fueled do-it-yourself projects tapered off. Shares of rival Lowe’s Companies also dropped.
A report showed that U.S. retail sales fell more than expected in July, as supply shortages depressed motor vehicle purchases and the boost to spending from the economy’s reopening and stimulus checks faded, suggesting a slowdown in growth early in the third quarter.
“The retail sales drop I think clarified for investors that COVID may well be a big problem going into the fall,” said Rick Meckler, partner at Cherry Lane Investments in New Vernon, New Jersey.
All three major U.S. indexes ended well lower, after the S&P 500 and the Dow Industrial had previously closed at record highs for five straight sessions.
“The (market) backdrop remains really solid,” said Katie Nixon, chief investment officer at Northern Trust Wealth Management. “At this point, when you have some of these negative macro indicators coming in and you have markets that are selling at all-time highs with pretty expensive valuations by any measure, there is just going to be more vulnerability to that kind of bad news.”
Unofficially, the Dow Jones Industrial Average fell 279.68 points, or 0.79%, to 35,345.72, the S&P 500 lost 31.37 points, or 0.70%, to 4,448.34 and the Nasdaq Composite dropped 137.58 points, or 0.93%, to 14,656.18.
With the market in a period that has seasonally been weak historically, investors have said stocks may be due for a significant drop, with the S&P 500 yet to experience a 5% pullback this year. On Monday, the S&P 500 closed 100% above its March 2020 low.
Still, market watchers have said that huge amounts of cash held by investors and companies could protect stocks from severe declines, as buyers are quick to look for opportunities to scoop up cheaper shares. In an encouraging sign about the economic rebound, a Federal Reserve report on Tuesday showed production at U.S. factories surged in July.
Investors are looking for signs about when the Fed will rein in its easy money policies, with minutes from the central bank’s latest meeting due on Wednesday, and are watching the resurgence in COVID-19 cases and its impact on the economy.
Reuters
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