Specialist James Sciulli, foreground, works at his post on the floor of the New York Stock Exchange, Wednesday, May 4.Richard Drew/The Associated Press
Canadian stocks fell on Wednesday, extending the biggest drop in almost three months, as data showing a record trade deficit in March fueled declines in commodity and industrial shares.
The benchmark S&P/TSX Composite Index fell 0.55 per cent, or 75.68 points, to 13,632 in Toronto. The benchmark gauge suffered its third straight loss after capping three weeks of gains that left it among the best-performing developed markets in the world this year. The gauge now trades at 21 times earnings, about 10 per cent higher than the 19.1 times earnings valuation of the S&P 500 Index, data compiled by Bloomberg show.
Five of 10 main industries in the S&P/TSX advanced, led by consumer staples.
The resource-dominant S&P/TSX has sputtered to start the month of May, as commodities producers slumped after a rally of more than 40 per cent in the first four months of the year. Global equities have slowed amid the uncertain outlook for growth and speculation higher interest rates in the U.S. will boost the dollar's value.
Canada's trade gap unexpectedly widened to a record $3.41-billion in March, according to a Statistics Canada report Wednesday, as exports to the U.S. fell 6.3 per cent reviving concern a stalling American recovery will derail Canada's recent rebound. The trade surplus with the U.S. shrank to its narrowest since December 1993, the data showed.
Materials producers slumped 2.1 per cent Wednesday, as metals from copper to gold retreated. Energy producers fell as crude fluctuated in New York, after declining 5.2 per cent in the previous three sessions. Several companies reduced crude output amid a raging wildfire in Fort McMurray in Alberta, prompting tens of thousands to flee.
Bank of Nova Scotia dropped 1.3 per cent for a third straight decline, extending losses during that period to almost 5 per cent after Canada's third largest lender said it will post a $275-million restructuring charge in the second quarter to cover the cost of job cuts and other productivity enhancements as it shifts to digital banking.
Maple Leaf Foods Inc. jumped 6.8 per cent after posting first-quarter earnings ahead of analysts' estimates as margins improved. Torstar Corp. sank 6.4 per cent, the most since March 18, after posting a first-quarter loss amid the challenging print advertising environment.
U.S. stocks declined for a second day on Wednesday, weighed down by tepid data on private sector U.S. jobs and a retreat in biotech shares.
The Dow Jones industrial average fell 99.17 points, or 0.56 per cent, to 17,651.74, the S&P 500 lost 12.2 points, or 0.59 per cent, to 2,051.17 and the Nasdaq Composite dropped 37.59 points, or 0.79 per cent, to 4,725.64.
"We had several economic numbers that came out, and ADP in particular was weaker than expected, which is negative for the market," said Richard Sichel, chief investment officer at Philadelphia Trust Co., which oversees $2-billion. "At the moment, data around the world isn't being taken as positive. We started to test the upper end of the range, and with the absence of more good news to push the needle up, we're consolidating and moving down."
A report Wednesday showed U.S. companies hired fewer workers in April than estimated, signalling employment gains may have peaked and adding to anxiety over growth sparked by yesterday's weaker factory readings overseas. Separate data showed American service companies expanded in April at the fastest pace in four months, suggesting the economy is firming up after a weak start to the year.
Lacklustre earnings and lukewarm signs of economic growth have given investors little incentive to keep pushing a rally that sent the S&P 500 up as much as 15 per cent from a February low. After a tumultuous start to the year amid worries about a global slowdown led by China, a rebound in oil prices and signs of stability in the world's second-largest economy lifted the gauge to a four-month high on April 20 to close 1.3 per cent away from a record set last May.
"We are back to having the same concerns as the start of the year," said Veronika Pechlaner, who helps oversee $10 billion at Ashburton Investments, part of FirstRand Group, in Jersey, Channel Islands. "We are definitely starting to see consolidation and weakness again. Earnings are still ongoing, with mixed results."
The Stoxx Europe 600 Index was down 1.1 per cent, with all industry groups falling. Anheuser-Busch InBev NV -- the world's largest brewer -- slid 1.6 per cent after reporting sales and profit growth that missed estimates. BHP Billiton Ltd. tumbled after it was named in a $44 billion law suit over a dam rupture in Brazil that caused deaths and severe environmental damage.
The MSCI Emerging Markets Index of stocks fell 1.2 per cent to the lowest in a month. Russia's Micex Index dropped 1.4 per cent as trading resumed following a two-day holiday. The Hang Seng China Enterprises Index fell 0.6 per cent, dropping for a third day, and the Shanghai Composite Index slipped less than 0.1 per cent.
Oil was little changed after swinging between losses after the government reported U.S. crude inventories jumped last week and gains amid concern that oil companies in Canada will be forced to further cut production due to wildfires.
Futures rose in the last few minutes of trading in New York after earlier declining 1 per cent to $43.22 a barrel. A report from the Energy Information Administration on Wednesday showed that nationwide crude inventories climbed by 2.78 million barrels to 543.4 million barrels in the week ended April 29 while stockpiles at Cushing, Okla., rose for a second week. Supplies from Canada may be curtailed as companies including Royal Dutch Shell Plc and Suncor Energy Inc. reduced oil-sands production due to wildfires.
The crude inventory build was "much greater than expected," Phil Streible, senior market strategist at RJO Futures in Chicago, said by telephone. "Regardless if demand picks up at all -- which we're not really seeing -- and despite any kind of reduction in rigs, it seems like supply levels are continuing to build. That's going to further put pressure on the market."
Analysts surveyed by Bloomberg before the EIA report expected an inventory gain of 750,000 barrels, while the American Petroleum Institute was said to report an increase of 1.3 million barrels. Crude stockpiles at Cushing, the delivery point for WTI and the biggest U.S. storage hub, rose 243,000 barrels to 66.3 million. Gasoline inventories climbed by 536,000 barrels.
Prices remain about 60 per cent below their peak in mid-2014 as the global oversupply persists. Production from the Organization of Petroleum Exporting Countries has risen, underpinned by gains from Iraq and Iran, according to data compiled by Bloomberg. U.S. crude production dropped by 113,000 barrels a day last week, the largest decline since August, according to the EIA report. U.S. output has steadily fallen to 8.83 million barrels a day as of April 29 from a record 9.61 million last June.
Oil companies including Suncor, Shell and Syncrude Canada Ltd. have curbed output in Canada's main oil-sands region after wildfires forced tens of thousands of people to flee Fort McMurray in Alberta. Imperial Oil Ltd., Devon Energy Corp. and Cenovus Energy Inc. said the fires aren't affecting operations.
"I suspect the price would have come off a little bit more had it not been for the growing concern of what the impact of the wildfires is in Alberta," Randy Ollenberger, an analyst at Bank of Montreal's BMO Capital Markets unit in Calgary, said. Traders will be "thinking about how this might impact inventories in PADD 2 over the coming weeks, as we start to see lower production coming out of the oil sands."
West Texas Intermediate for June delivery rose 13 cents to settle at $43.78 a barrel on the New York Mercantile Exchange. Brent for July settlement declined 35 cents to end the session at $44.62 a barrel on the London-based ICE Futures Europe exchange.
"I don't think we're going to see oil breaking higher anytime soon," Mr. Ollenberger said. "We still have a lot of oil in inventory, growing OPEC supply and the declines that the market is waiting for -- that will take some time to start to flow through."
With files from Reuters