Canadian stocks sank to a three-week low on Thursday, with commodity-linked sectors leading the losses, as investor fears of a slowdown in global growth dented oil and metal prices. Wall Street performance was mixed.
The benchmark S&P/TSX composite index fell in its sixth straight session of losses - its longest losing streak since the height of the pandemic-induced selloff in February 2020. The TSX fell 86.75 points, or 0.43%, to 20,215.36. Sector performance was mixed, but the heavyweight energy, financials and materials indexes lost 1.72%, 0.44%, and 1.86%, respectively.
The S&P 500 rose in choppy trading, with gains in tech shares countering losses in cyclical sectors, as investors took the pulse of the economic rebound and gauged when the Federal Reserve might temper its monetary stimulus.
Tech also supported the Nasdaq, while economically sensitive sectors such as energy and materials were also weak on Wall Street.
Data showed that the number of Americans filing new claims for unemployment benefits fell to a 17-month low last week, pointing to another month of robust job growth.
Stocks had sold off sharply a day earlier after minutes from the Fed’s July meeting showed officials felt it was possible that a key benchmark for decreasing support “could be reached this year.”
“It’s very much investors grappling with the growth outlook for the global economy, and how aggressive the Fed will taper when they get around to it,” said Paul Nolte, portfolio manager at Kingsview Investment Management in Chicago.
Unofficially, the Dow Jones Industrial Average fell 63.34 points, or 0.18%, to 34,897.35, the S&P 500 gained 5.63 points, or 0.13%, to 4,405.9 and the Nasdaq Composite added 15.87 points, or 0.11%, to 14,541.79.
Technology shined among S&P 500 sectors, helped by Nvidia Corp shares. The chip company forecast third-quarter revenue above Wall Street expectations late on Wednesday as it benefits from a boom in demand.
Consumer staples and real estate - generally considered defensive sectors - were higher.
Financials and industrials were among the sectors in the red.
In company news, shares of U.S. department store chains Macy’s Inc and Kohl’s Corp both rose sharply, following increased annual sales forecasts.
A rebound in the U.S. economy including a stellar second-quarter corporate earnings season on top of accommodative monetary policy has underpinned positive sentiment for equities, with the S&P 500 up about 100% since its March 2020 pandemic low.
But 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.
Focus is shifting to the Fed’s annual research conference in Jackson Hole, Wyoming, next week for any read about the central bank’s next steps.
“The key economic variable continues to be inflation,” said Jeff Mortimer, director of investment strategy at BNY Mellon Wealth Management. “Is it temporary, is it permanent, what number will the Fed tolerate in order to achieve its full employment mandate?”
Oil prices skidded for a sixth session, hitting lows not seen since May, as investors pulled back over concerns about weakened global demand as COVID-19 cases climb and on the back of a rise in the U.S. dollar.
The oil market rallied throughout the first half of 2021, but has lost about 15% since early July. The recent wave of coronavirus infections worldwide has sapped global travel and threatens economic activity, just as major oil producers are getting ready to increase supply.
“There seems to be a lot of people getting squeezed out of long positions,” said Phil Flynn, analyst at Price Futures Group.
Brent crude lost $1.78, or 2.6%, to settle at $66.45 a barrel, after touching $65.57, the lowest level since May 21. The most-active contract for U.S. West Intermediate (WTI) fell $1.71, or 2.6%, to $63.50 a barrel. It fell earlier to $62.41 a barrel, the lowest level since May 21.
Both benchmarks have declined for six days in a row, their longest losing streak since February 2020.
The Delta variant of the coronavirus in areas where vaccine rates are low is driving transmission of COVID-19, the World Health Organization said. Coronavirus-related deaths have spiked in the United States over the past month.
The U.S. dollar hit a nine-month high on Thursday, a day after minutes from the Federal Reserve’s last policy meeting showed policymakers are considering reducing pandemic-era stimulus this year. A rising U.S. dollar makes greenback-denominated oil more expensive for holders of other currencies.
“There’s concern that the Fed will begin tapering, resulting in a stronger dollar and weaker crude prices,” said Andrew Lipow, president of Lipow Oil Associates in Houston.
U.S. gasoline inventories rose unexpectedly last week, federal data showed, adding to concern about demand. U.S. gasoline consumption tends to peak in the summer months, and should ebb headed into the latter months of 2021.
The International Energy Agency last week trimmed its oil demand outlook due to the spread of the Delta variant. OPEC, however, left its demand forecasts unchanged.
The Canadian dollar was trading 1.2% lower by late afternoon at 1.2820 to the greenback, or 78.00 U.S. cents, giving up all of this year’s gains and extending a string of declines since the start of the week. It touched its weakest intraday level since Feb. 5 at 1.2832.
Still, Canadian data for July showed home prices climbing at a record annual pace and the reopening of the economy giving payroll jobs a boost.
Canada’s retail sales report for June is due on Friday, which could offer further clues on the strength of domestic activity.
Canadian government bond yields were lower across a flatter curve, tracking the move in U.S. Treasuries. The 10-year fell 2.8 basis points to 1.127%.
U.S. gold futures settled down 0.1% at $1,783.1.
Reuters, Globe staff
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