Midday: TSX drops to one-year low as miners and Manulife withdraw

Midday: TSX drops to one-year low as miners and Manulife withdraw

Canada’s main stock index fell to its lowest level in nearly a year on Thursday, a day after falling into correction territory, as weak mining stocks and downbeat earnings from Manulife Financial weighed on sentiment.

At 10:47 AM ET, the S&P/TSX Composite Index on the Toronto Stock Exchange was down 168.82 points, or 0.85%, at 19668.43, extending losses for the sixth straight session. It fell to 19,516.07 in morning trading.

The materials sector, which includes miners of precious and base metals and fertilizer companies, lost 2.2%, tracking weak bullion prices, and copper also fell to its lowest level in seven months.

The financial sector fell 1.8%, with Manulife Financial and Sun Life Financial down 9.9% and 2.3%, respectively, after insurers on Wednesday reported lower core earnings from a year ago as the COVID-19 pandemic weighed on their Asian earnings. With Manulife also missing estimates.

The energy sector fell 2.1% as oil prices tumbled nearly 2% amid recession fears that have ravaged global financial markets, outweighing supply concerns and geopolitical tensions in Europe.

“Market sentiment looks downward and frightening this morning. We are definitely seeing a heavy defensive rotation. Commodity prices are under huge pressure today,” said Colin Szyczynski, chief market strategist at SIA Wealth Management.

On Wednesday, the Canadian benchmark index fell to its lowest level since July 2021, dropping its losses since the record March 29 close to 10.2%. A correction is confirmed when the indicator closes 10% or more below its standard closing level.

Meanwhile, investor sentiment was pressured by data showing the US consumer price index rising, raising concerns about more aggressive policy tightening by the Federal Reserve.

Canada’s April inflation report is due next Wednesday and money markets expect the Bank of Canada to raise interest rates by half a percentage point at its second consecutive policy meeting on June 1.

Wall Street’s main indexes fell on Thursday, as growth stocks led declines for a second straight session as investors worried that aggressive interest rate increases to curb decades-old inflation could push the economy into recession.

Shares of Megacap Meta Platforms, Microsoft Corp, Alphabet Inc, Apple Inc, Amazon and Tesla Inc, owner of Google, fell between 2% and 5.9%.

Ten of the 11 major sectors of the Standard & Poor’s Index fell in morning trading. Technology stocks and consumer discretionary stocks fell 1.2% and 2.4%, respectively.

The tech-heavy Nasdaq fell more than 3% on Wednesday, after data showed that US consumer prices moderated in April but are likely to stay hot for a while and keep the Federal Reserve on the brakes to cool demand.

A report released by the Labor Department on Thursday showed that the producer price index for final demand rose 0.5% in April, in line with expectations, compared to a 1.6% increase in March.

What we’re seeing is that inflation is starting to slow down but the speed hasn’t been as fast as people had hoped. “So I think the markets are still afraid of that,” said Jane Goldman, chief investment officer at Cetera Investment Management.

“There is really a lot of uncertainty around the Federal Reserve right now. If they are too aggressive, it hurts economic growth, but (if) they are too conservative, high inflation hurts consumption, which hurts growth as well.”

Growth stocks, which led Wall Street’s rally from pandemic lows in 2020, have borne the brunt of the sell-off this year as their returns and valuations are discounted more deeply when interest rates rise.

The S&P 500 growth index is down 26.8% so far this year, a much larger drop compared to the 9.1% drop in its counterpart in value, which includes sensitive sectors of the economy such as banking, energy and industry.

Traders are pricing in a 61% chance of a Fed hike of 75 basis points in June.

The Dow Jones Industrial Average fell 294.57 points, or 0.93 percent, to 3,1539.54, the Standard & Poor’s fell 53.09 points, or 1.35 percent, to 3,882.09, and the Nasdaq Composite fell 193.70 points, or 1.70 percent, to 11,170.53.

Among other stocks, The Walt Disney Co. fell 3.9% after the entertainment giant’s second-quarter revenue and profit missed estimates and warned that supply chain disruptions and rising wages could pressure funding.

Plant protein maker Beyond Meat Inc last fell 1% after breaking its $25 IPO price at the open as quarterly losses ballooned.

Tapestry fabric rose 10.6% after owner Kate Spade said he was confident that demand for luxury bags and apparel in China would recover after the major growth market lifted COVID-19 restrictions.

Reuters

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2022-05-12 09:40:19

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