Canada’s main stock index closed down more than three per cent in a broad-based decline driven by falling commodity prices as investors continue to worry about the effects of rising rates.
Monday’s market drop, which included similar declines in U.S. markets, comes as an extension of the pressure markets have been under in recent weeks, said Craig Fehr, an investment strategist at Edward Jones.
“Markets 1/8 are 3/8 struggling to get comfortable with an environment where central banks broadly, but perhaps most prominently the Fed, are likely to continue to tighten into what is an economy that is showing a little bit of wear and tear.”
The S&P/TSX composite index had been insulated somewhat from the trend earlier in the year thanks to rising commodity prices, but Monday saw declines across major resources as investor worry about growth prospects helped push the market down.
The S&P/TSX composite index ended down 633.59 points, or 3.07 per cent, at 19,999.69.
The retreat came as the June crude contract ended down US$6.68, or 6.1 per cent, at US$103.09 per barrel and the June natural gas contract was down US$1.02 at US$7.03 per mmBTU.
Lower crude prices put pressure on energy stocks, including Suncor Energy Inc. down 5.07 per cent, Cenovus Energy Inc. off 7.31 per cent, and Canadian Natural Resources Ltd. down 7.17 per cent, to leave the overall energy subindex down 7.06 per cent.
While there are also ongoing concerns of how much effect on oil demand the shutdowns in China will have, overall the declines seem to be pushing lower by an absence of news to prop them up, said Fehr.
“We’re in a bit of a correction period where the path of least resistance seems to be down …. days that are absent any sort of meaningful news, both positive or negative, there seems to be some lower drifts in equities.”
Lower oil prices, along with rising yields in the U.S., put pressure on the loonie, which traded for 77.14 cents US compared with 77.63 cents US on Friday.
All other major indexes on the TSX were also down, including base metals down 5.68 per cent as the June gold contract closed down US$24.20 at US$1,858.60 an ounce and the July copper contract was down 7.4 cents at US$4.19 a pound.
In New York, the Dow Jones industrial average ended down 653.67 points at 32,245.70. The S&P 500 index was down 132.10 points, or 3.20 per cent, at 3,991.24, while the Nasdaq composite was down 521.41 points, or 4.29 per cent, at 11,623.25.
Fehr said investors are also being especially cautious ahead of the latest U.S. inflation data coming out Wednesday, when investors will get an update on whether inflation is peaking and how fast the fed will have to change rates.
“Equity markets, and I think bond markets as well, are going to look for any data that can confirm that central banks won’t have to be as aggressive at the worst-case scenario.”
This report by The Canadian Press was first published May 9, 2022.