Canada’s main stock index fell on Friday, giving back some of its weekly gain, as worries that the conflict in the Middle East could widen weighed on risk appetite, offsetting a boost to resource shares from higher commodity prices.
The Toronto Stock Exchange’s S&P/TSX composite index ended down 37.38 points, or 0.2 per cent, at 19,462.86. For the week, it was up 1.1 per cent, ending a streak of three straight weekly declines.
U.S. benchmark the S&P 500 also lost ground as Israel said it carried out raids inside the Gaza Strip, its first announcement of a shift to ground operations aimed at Hamas fighters after their deadly rampage in Israel.
“There’s definitely a flight to safety when we look at oil and gold over what may happen next in the Middle East,” said Mike Archibald, portfolio manager at AGF Investments.
The Toronto market’s technology sector lost 1.8 per cent and heavily weighted financials were down 0.8 per cent.
“Financials are an under-owned sector at the moment, and people are waiting to see when the increase in (interest) rates starts to take effect on some of their loan books,” Archibald said.
Domestic data showed home sales falling for a third straight month in September.
The materials sector, which includes miners and fertilizer companies, added 2.3 per cent as the price of gold benefited from safe-haven demand, jumping 3.2 per cent to about $1,929 per ounce.
The energy sector was up 1.5 per cent as the price of oil settled 5.8 per cent higher at $87.69 a barrel.
“Crude prices are surging as the oil market will remain very tight given escalating geopolitical risks could threaten supplies,” Edward Moya, a senior market analyst at OANDA, said in a note.
Wall Street’s three major indexes opened higher but lost ground after a preliminary reading on U.S. consumer sentiment showed a sharp fall in October.
Investors were also monitoring news out of the Middle East. On Friday Israel said it carried out raids inside the Gaza Strip, its first announcement of a shift to ground operations aimed at Hamas fighters after their deadly rampage in Israel.
U.S. Treasury prices rose as investors looked for safety while the price of U.S. crude oil rose more than 5 per cent.
“This signals more of a risk off-sentiment,” said Lauren Goodwin, economist and portfolio strategist at New York Life Investments. The moves in bonds, equities and oil reflect worries about deteriorating consumer sentiment, the global economy and geopolitical conflict, she added.
At this stage of the economic cycle when data has been good but is “expected to deteriorate over the next several months,” Goodwin said, “shifts in leadership are incredibly common and no one market narrative tends to last for more than a couple of days at a time.”
Unless there is a major escalation in the Middle East war the strategist said he did not expect Friday’s mood to be “indicative of the beginning of a troubled market.”
According to preliminary data, the S&P 500 lost 21.66 points, or 0.49 per cent, to end at 4,328.34 points, while the Nasdaq Composite lost 166.98 points, or 1.23 per cent, to 13,407.23. The Dow Jones Industrial Average rose 39.41 points, or 0.13 per cent, to 33,673.39.
Among the S&P’s 11 major industry sectors energy was leading gains as oil prices rose. Defensive sectors such as utilities were also top gainers during the session.
Other safe-haven assets such as gold rallied.
Shares in JPMorgan Chase, Wells Fargo and Citigroup rose after their quarterly profits trounced analysts’ estimates with help from higher interest rates.
But even the S&P 500 Banks index pared gains as the session wore on after earlier rising as much as 3.4 per cent to a three-week high.
Federal Reserve Bank of Philadelphia President Patrick Harker said he believes the central bank is likely done with its rate-hiking cycle as price pressures have eased.
Among individual stocks, asset manager BlackRock dipped after posting a sharp drop in third-quarter net inflows.
Reuters