TORONTO — v> Canada’s main stock index lost some ground midweek on weakness by the key energy and financials sectors.
The S&P/TSX composite index closed down 132.41 points at 15,701.33.
Activity was mixed in the United States. The Dow Jones industrial average was down 282.31 points at 26,989.99 and the S&P 500 index was down 17.04 points at 3,190.14.
The Nasdaq composite was up 66.59 points at 10,020.35, the first time it closed above 10,0000 after setting another record intraday high. The tech-heavy market benefited as shares of Amazon and Apple set new highs.
Markets started the day stronger but faded even though the Federal Reserve gave a dovish outlook that was widely expected as it kept interest rates unchanged and vowed to keep them at rock-bottom levels at least through 2022.
“So of course, investors welcomed this move to maintain an accommodative stance in general,” said Candice Bangsund, portfolio manager for Fiera Capital.
But Fed chairman Jerome Powell later highlighted that considerable risks prevail while the path forward remains uncertain and dependent on the COVID-19 pandemic.
The U.S. economy is expected to shrink 6.5 per cent this year before growing by five per cent in 2021 and 3.5 per cent in 2022.
The central bank forecasts that the unemployment rate will end the year at 9.3 per cent before falling to 6.5 and 5.5 per cent over the next two years.
Powell noted the recovery will potentially take some time, thereby potentially dismissing the potential for a sharp V-shaped recovery in the back half of the year.
“The fact that equities are now fading that really might just suggest that investors got a little bit ahead of themselves and didn’t maybe acknowledge the risks out there particularly given the current level of equity valuations,” Bangsund said in an interview.
Eight of the 11 major sectors of the TSX were lower, led by energy.
It dropped four per cent despite higher crude oil prices with Shawcor Ltd. and Vermilion Energy Inc. up 8.9 and 7.1 per cent respectively.
The July crude contract was up 66 cents at US$39.60 per barrel and the July natural gas contract was up 1.3 cents at US$1.78 per mmBTU.
The Canadian dollar traded for 74.68 US compared with 74.50 cents US on Tuesday.
Real estate, health care, industrials and the heavyweight financials sectors were also lower. Industrials dropped as shares of Bombardier Inc. fell nearly eight per cent and Air Canada were 7.1 per cent lower.
Materials, consumer staples and technology were higher. Materials climbed 2.5 per cent with Oceanagold Corp. up 8.2 per cent and Kinross Gold Corp. up 6.2 per cent.
The August gold contract was down US$1.20 at US$1,720.70 an ounce and the July copper contract was up 5.75 cents at nearly US$2.66 a pound.
The strong weighting of U.S. markets towards technology stocks helped the S&P 500 and Nasdaq to outperform the TSX.
While coronavirus hospitalizations have surged in Texas and Arizona, investors have been largely ignoring the risks of a second wave of infections, said Bangsund.
“A lot of the optimism we’ve been seeing has largely been positioning for a scenario whereby a vaccine is made available and economic activity can resume and go back to more pre-COVID levels at a faster than expected pace.”
This report by The Canadian Press was first published June 10, 2020
