At midday: TSX falls amid global risk-off sentiment
Canada’s main stock index fell on Friday as worries about an aggressive policy stance by major central banks hurt risk appetite even as data showed domestic retail sales rose unexpectedly in June.
At 10:23 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was down 123.67 points, or 0.61%, at 20,141.7.
Global stocks slipped and the dollar gained ground as investors digested comments from U.S. Federal Reserve policymakers that signaled further interest rates were on the horizon, while European data pointed to elevated inflationary pressures.
The Canadian energy sector dropped 0.3% even as oil prices recouped from losses earlier in the session.
“A strong U.S. dollar is not good for multinationals, because of the oil exposure in our country. Besides, globally there are a lot of cross currents revolving around oil,” said Allan Small, senior investment advisor at HollisWealth Inc.
Data earlier showed Canadian retail sales rose 1.1% in June, easily beating forecasts, on pricier gasoline and higher sales at car dealerships, but sales were seen falling in July.
All eyes are now on the Fed’s annual Jackson Hole symposium next week.
“The central banks have a very complex balancing act. They want to slow down the economy too much. They don’t want it too hot or too cold, they want it just right,” Small added.
Canadian banks, which will begin reporting results next week, are on average expected to post profit declines in the third quarter as a murky economic outlook drives up provisions for credit losses (PCL), analysts and investors said.
The financials sector slipped 0.7%. The industrials sector fell 0.2%.
The materials sector, which includes precious and base metals miners and fertilizer companies, lost 1.1% as gold futures fell 0.3%.
Wall Street fell on Friday with megacap growth and technology stocks leading a broader market selloff as rate hike worries sapped risk appetite.
Stocks have wavered this week after minutes from the U.S. Federal Reserve’s July meeting were released on Wednesday, as investors tried to get an accurate reading of the central bank’s monetary policy tightening path.
The blue-chip Dow was on track to post slim weekly gains, while the Nasdaq and the S&P 500 were headed for their first weekly loss after four straight weeks of gains.
“Lot of individual not so great news here today and it’s just manifesting in an overall market selloff,” said Dennis Dick, retail trader at Triple D Trading, pointing to weak results from Deere & Co, inflation numbers in Germany and a selloff in meme stocks and cryptocurrencies.
“You’re getting a little bit of profit taking (after) a pretty good run for the last six weeks.”
Deere fell 2.8% after it missed earnings estimates as the world’s largest heavy equipment maker continues to grapple with parts shortages stemming from supply chain snarls.
The S&P 500 industrials sector fell 1%.
High-growth and technology stocks such as Amazon.com Inc and Alphabet Inc declined nearly 2% as U.S. Treasury bond yields climbed, mimicking European bonds after Germany reported record-high increases in monthly producer prices.
Banks also fell 1.3% and were on track to end the week lower, potentially snapping their six-week winning streak.
Meanwhile, Richmond Federal Reserve President Thomas Barkin said on Friday the U.S. central bank’s efforts to control inflation could lead to a recession, but it needn’t be “calamitous.”
St. Louis Fed President James Bullard said on Thursday he was leaning toward supporting a third straight 75-basis-point rate hike in September, while San Francisco Fed colleague Mary Daly said hiking rates by 50 or 75 basis points next month would be “reasonable.”
The Dow Jones Industrial Average was down 192.74 points, or 0.57%, at 33,806.30, the S&P 500 was down 38.75 points, or 0.90%, at 4,244.99, and the Nasdaq Composite was down 187.97 points, or 1.45%, at 12,777.37.
The Fed has raised its benchmark overnight interest rate by 225 bps since March to fight four decade-high inflation.
Focus next week will be on Fed Chair Jerome Powell’s speech on economic outlook at the annual global central bankers’ conference in Jackson Hole, Wyoming.
Cryptocurrency and blockchain-related stocks dropped following a sudden selloff in bitcoin, with crypto exchange Coinbase Global and miner Marathon Digital down 8.5% and 11.5%, respectively.
Bed Bath & Beyond Inc plunged 41.1% as billionaire investor Ryan Cohen exited the struggling home goods retailer by selling his stake.
General Motors Co rose 1.8% after it said it would reinstate quarterly dividend payouts.