Traders Robert Oswald, left, and John Yaccarine work on the floor of the New York Stock Exchange, Wednesday, Feb. 24.Richard Drew/The Associated Press
Canadian stocks fell for a second consecutive day on Wednesday, as weaker-than-expected bank earnings dragged down financial stocks.
The Standard & Poor's/TSX Composite Index lost 23.17 points, or 0.18 per cent, to 12,740.27 in Toronto. The benchmark gauge has lost 0.6 per cent in February, headed for a fourth monthly decline, as volatility returned to global markets after a respite last week. Global-growth concerns have resurfaced as investors look to whether lenders will suffer as some energy producers struggle amid low oil prices.
The S&P/TSX remains among the best-performing markets in the developed world this year, trailing New Zealand and topping returns from markets in the U.S., U.K. and Germany. Shares in the Canadian benchmark trade at about 19 times earnings, about 1.1 times more expensive than the valuation of S&P 500 shares, according to data compiled by Bloomberg.
A jump in gold due to demand for havens have caused raw- material stocks to be the best-performing group in the S&P/TSX in 2016. Still, the measure's 26 per cent weighting in energy companies has weighed on returns, as oil trades near the lowest levels in 12 years.
Financial services stocks sank 1.7 per cent as five of 10 industries in the S&P/TSX retreated.
RBC slumped 2.6 per cent on first-quarter profit that fell short of analysts' estimates as earnings from insurance and capital markets fell. The lender set aside more money for soured energy loans amid crude's slide. RBC is the third to report results this week, followed by Toronto-Dominion Bank and Canadian Imperial Bank of Commerce Thursday.
TD declined 1.8 per cent.
Oil rallied as much as 3 per cent on Wednesday with Brent prices helped by news of stalled loadings for the U.K.'s North Sea oil while U.S. crude futures rose after strong demand for gasoline offset worries about record high crude inventories. Some traders bet Brent and U.S. crude futures would fall in coming days as OPEC remained opposed to cutting output, and as U.S. refiners entered seasonal maintenance that causes a bigger buildup in crude stockpiles.
Encana Corp. soared 22.4 per cent, the most intraday since 2008, as the energy producer cut its annual budget, lowered the dividend and announced another 20 percent reduction in its workforce as it reported a fourth straight quarterly loss, amid tumbling oil and natural gas prices. Shares had tumbled 41 per cent this year before the announcement.
Health care stocks rose 4.4 per cent, led by a 5.5-per-cent gain from Valeant Pharmaceuticals Inc.
Technology and commodity companies paced a rebound in U.S. stocks, with a turnaround in crude-oil prices sparking broader buying that erased declines of as much as 1.7 per cent in benchmark indexes.
The Nasdaq Composite Index rallied 0.9 per cent to 4,542.61 in New York, boosted by gains in Apple Inc. and Facebook Inc. The Russell 2000 Index surged 1 per cent after an early 1.5-per-cent slide. The Standard & Poor's 500 Index added 0.4 per cent to 1,929.64, after the gauge lost as much as 1.6 per cent.
"Oil turned positive and that helped accelerate a move higher for equities," said Kevin Kelly, the New York-based chief investment officer at Recon Capital Partners. "I think everybody's trying to get a firm footing on where this market's going to trade. Volatility keeps going up and down, same with intraday moves in the market, it's really something that's not new."
Early on, it looked as if equities were headed for another steep selloff. A recent rebound in U.S. stocks had faltered Tuesday as global-growth concerns resurfaced, after the S&P 500 had cut its 2016 declines by more than half over six sessions.
Wednesday's gains helped the S&P 500 cut its February decline to 0.5 per cent, still heading for a third straight monthly drop which would be the longest stretch in more than four years. Concern that China's slowdown will hurt global growth, and that lenders will suffer as some energy producers struggle to stay solvent amid low oil prices, has weighed on equities this year, dragging the U.S. benchmark 9 per cent below its all-time high reached last May.
Brent, the global benchmark for crude, settled up $1.14, or 3.4 per cent, at $34.41 a barrel after market sources cited loading problems for North Sea crude.
A supertanker chartered by oil trader Vitol to carry North Sea Forties to South Korea was unable to load at Hound Point, a marine terminal in Scotland, due to technical issues, traders and industry sources told Reuters.
"If there are loading issues in the North Sea, that would partly explain Brent's outperformance today," said Matt Smith, who tracks crude loadings for Clipper Data in New York. "But the oil complex as a whole has also moved higher from strong draws for U.S. gasoline."
U.S. crude futures settled up 28 cents, or nearly 1 percent, at $32.15 after gasoline demand rose more than 5 per cent over the past four weeks compared with a year ago, government data showed. Inventories of the motor fuel also slid on lower refinery runs.
The strong gasoline numbers took attention away from U.S. crude stockpiles, which rose 3.5 million barrels last week to reach an all-time peak above 507 million barrels.
Some traders think crude prices will head back lower after Saudia Arabian Oil Minister Ali al-Naimi ruled out output cuts on Tuesday in favor of a deal to freeze output at January's highs.
"We feel it's just a matter of time before we break below $30 to the downside," said Tariq Zahir, fund manager at New York's Tyche Capital Advisors, who is wagering that nearby U.S. crude futures will weaken versus forward contracts.
"The talk of a bottom having formed in crude prices will be proven wrong again for the umpteenth time."
Oil has slid from more than $100 a barrel since mid-2014, pressured by excess supply and a decision by the Organization of the Petroleum Exporting Countries to abandon its traditional role of cutting production to boost prices.
With files from Reuters