Canada’s main stock index fell on Wednesday after five straight days of gains as technology and material stocks fell, although a rebound in oil prices boosted heavyweight energy shares and capped overall losses.
U.S. stocks also closed down, with indexes volatile after investors thought minutes from the Federal Reserve’s meeting in July suggested policymakers may be less aggressive than previously thought when they raise interest rates in September.
The S&P/TSX Composite Index slipped 88.53 points or 0.44 per cent to 20,101.44 after notching its highest closing level in more than two months the day before.
The index has rallied about 11 per cent from its July trough.
“There’s a lot of short covering that’s happening which has caused the market to rally quite substantially off of the lows,” said James Telfser, Managing Partner and Portfolio Manager at Aventine Investment Counsel.
“I am sure they will pause as we try to digest more data as it comes to us.”
The technology sector, which tends to be sensitive to higher bond yields, lost 1.7 per cent, while the materials sector, which includes precious and base metals miners, lost 1.8 per cent.
Shares of Lundin Mining Corp. dropped 5.6 per cent as Chile issued a series of measures against a copper mine owned by the company, after a sinkhole opened up near one of the mines.
The loonie traded at 77.46 U.S. cents.
On Wall Street, major indexes sharply cut their losses after the release of the Fed minutes, with the Dow briefly turning positive before they returned to earlier losses.
The minutes also showed that Fed officials saw “little evidence” late last month that U.S. inflation pressures were easing, and that participants said it may take longer than anticipated for inflation to dissipate.
The Fed has lifted its benchmark overnight interest rate by 225 points this year to try to curb high inflation. After the release of the minutes, traders of futures tied to the Fed’s policy rate saw a half-percentage-point rate hike as more likely in September.
“They stayed hawkish, but they also opened the door perhaps for a half of a percentage point hike in September as opposed to 75,” said Peter Cardillo, chief market economist at Spartan Capital Securities in New York.
The market had been solidly lower ahead of the minutes, with growth shares coming under pressure and weak results from Target weighing on retailers.
The Dow Jones Industrial Average fell 179.69 points or 0.50 per cent to 33,980.32, the S&P 500 lost 31.16 points or 0.72 per cent to end at 4,274.04 points, and the Nasdaq Composite slid 164.43 points or 1.25 per cent to 12,938.12.
“Although inflationary pressures have eased ,there remain pockets of seemingly entrenched inflation, particularly with food prices, rent and labor wages,” Quincy Krosby, chief global strategist for LPL Financial said in a note following the minutes.
After a brutal first-half of the year, stocks are up since the start of July. Upbeat corporate earnings have helped fuel a rebound.
While Target shares declined, home improvement chain Lowe’s Cos Inc were up after posting a better-than-expected quarterly profit.
Oil prices rose about 1.5 per cent after hitting a six-month low on Wednesday, as a steeper-than-expected drawdown in U.S. crude stocks outweighed concerns over rising Russian output and exports as well as recession fears.
U.S. crude stocks fell by 7.1 million barrels in the week to Aug. 12 to 425 million barrels, Energy Information Administration data showed, compared with analysts’ forecasts for a 275,000-barrel drop in a Reuters poll.
Brent crude settled US$1.31 or 1.42 per cent higher at US$93.65 per barrel. Earlier in the day, recession worries had pushed the benchmark price to its lowest since February at US$91.51.
U.S. West Texas Intermediate crude rose US$1.58 or 1.8 per cent to US$88.11 per barrel.
Reuters