Traders work on the floor of the New York Stock Exchange Oct. 30.Brendan McDermid/Reuters
Canada's main stock index fell sharply on Friday, pushed lower by a slump in Valeant Pharmaceuticals International Inc after it cut ties with a specialty pharmacy accused of helping it inflate revenue, and by retreats in heavyweight banks.
The Toronto Stock Exchange's S&P/TSX composite index closed down 262.71 points, or 1.90 per cent, at 13,529.17. It lost 3 per cent on the week and gained 1.7 percent through October.
Health-care stocks led Canadian equities lower, as Valeant extended its monthly rout to over 40 per cent amid intense scrutiny over its business practices. The stock had been one of the best performers in Canada through the first half of the year and briefly became the biggest company in the country by market capitalization.
Valeant's been the primary drag on the market. The embattled drugmaker said Friday it will terminate its relationship with Philidor Rx Services, the closely-associated pharmacy that Valeant has used to distribute its products. The decision came after it was reported Philidor altered doctors' prescriptions to wring more reimbursements from U.S. health insurers.
It finished down 17.67 per cent, or $26.19, to $122.04 on Friday.
"After the lows earlier in the year and highs of the June and July rebound, it was back to reality for the Canadian economy in August," said Andrew Grantham, an economist at CIBC World Markets in a note to clients. "Given the lingering effects of the oil price shock in some areas of the country, that reality appears to be one of very modest growth."
Canada's central bank has cut interest rates twice this year, to 0.5 per cent, to spur growth in a flagging economy amid oil's price collapse. Governor Stephen Poloz cut his growth forecasts for the next two years on Oct. 21 as weak investment by energy companies will restrain growth.
Bombardier Inc. Thursday reported a $4.9-billion loss in part due to writedowns related to its oft-delayed C Series jetliner. The aerospace company's quarterly loss was the third- largest in Canada since the third quarter of 2007, according to data compiled by Bloomberg.
On Friday, Bombardier rose 6.77 per cent, or 9 cents, to $1.42.
Husky Energy Inc. shares fell to the lowest in a decade, after the Canadian oil producer said it would start paying its dividend in stock.
The Calgary-based company dropped 12.83 per cent, or $2.60, to $17.67, the lowest intra-day price since April 2005. In announcing third-quarter earnings results, Husky said that starting January, it will pay its quarterly dividend in shares to preserve cash and give the company financial flexibility.
"The stock is under pressure because it is being treated as a dividend cut," Randy Ollenberger, an analyst at BMO Capital Markets in Calgary, said in an e-mail. "It is rare for companies to pay dividends with shares."
Energy companies are altering their dividend policies as they eliminate workers, shelve projects and sell assets to withstand a rout in oil prices that has extended 16 months. U.S. crude is hovering below $50 a barrel, less than half its high last year.
The financial sector fell 0.76 per cent, led by a 2.6-per-cent retreat from Royal Bank of Canada and a 2.72-per-cent drop from Toronto-Dominion Bank.
U.S. stocks faded late in October's final session, paring the strongest monthly gain since 2011 as financial and consumer staples shares retreated.The S&P 500 declined 0.5 per cent, or 9.97 points, to 2,079.43 in New York, with the gauge up 8.3 per cent this month. Stocks are also extended to five their longest streak of weekly advances this year.
The Dow Jones industrial average fell 91.46 points, or 0.52 per cent, to 17,664.34, while the Nasdaq Composite dropped 20.53 points, or 0.4 per cent, to 5,053.75.
"Recent Fed comments have been a little more hawkish, and we didn't get further easing from the Bank of Japan," said Matt Maley, an equity strategist at Miller Tabak & Co LLC in New York. "It's not like the market is falling out of bed, but when you combine that with how much we've been up lately, it gives us an excuse to pull back. We just had this huge rally -- pulling back is normal and healthy."
Analysts project profits for S&P 500 members dropped 3.9 per cent in the third quarter, improving from an estimated 6.1-pe-rcent decline a week ago, following better-than-forecast results from Chevron and Exxon Mobil. With about two-thirds of companies in the index finished with reporting this season, 75 per cent have beaten profit projections, while only 44 per cent have exceeded sales estimates.
The S&P 500 had rebounded nearly 12 per cent from its August low, spurred by gains in energy and technology shares -- the same groups that helped drag the index to its worst quarter since 2011. Both are now headed for their strongest monthly increase in four years amid easing concern that weakness in China will spread.
Central banks have dominated markets this month, with a weak U.S. jobs report jolting equities out of a summer swoon and sinking the dollar on speculation the Federal Reserve would keep interest rates pinned near zero into 2016. Persistent signs of weak global growth prompted the European Central Bank to hint at potential extra stimulus, while China unexpectedly cut its lending rate.
Fed officials said this week that U.S. growth was moderate, and they will evaluate progress in the labour market and inflation readings when considering whether to raise rates at their next meeting in December. Traders have now shifted their bets on the likelihood of a December increase -- pricing in a 50-per-cent chance of liftoff by year end, compared with as low as 30 per cent last week.
An earlier report Friday showed household spending rose less than forecast in September, with the smallest gain since January. Separate data showed wages and salaries rose in the third quarter at a faster pace, while another report showed consumer sentiment increased less than forecast in October as Americans viewed buying conditions as less favourable than they did earlier in the month.
Crude advanced after the number of rigs drilling for oil in the U.S. slumped to a five-year low as producers curb investment because of low prices.
West Texas Intermediate futures climbed 1.2 per cent. The number of active oil rigs fell by 16 this week to 578, adding to the 81 sidelined in the past two months, oilfield-services company Baker Hughes Inc. said. Chevron Corp. said that it's reducing about 10 per cent of its workforce, joining other energy companies in announcing cutbacks.
"The dramatic drop in the rig count is a sign that oil production will fall in the months ahead," Phil Flynn, senior market analyst at the Price Futures Group in Chicago, said by phone. "This is more evidence of pain in the oil patch. It's an indication of what companies are doing in response to the weak market."
Oil failed to sustain a gain above $50 (U.S.) a barrel earlier this month as OPEC pumps above its quota and the International Energy Agency estimates the surplus will remain until at least the middle of 2016. Royal Dutch Shell Plc announced its worst loss in 16 years on Thursday, including $8.2 billion in impairments on exploration and production assets.
WTI for December delivery climbed 53 cents to close at $46.59 a barrel on the New York Mercantile Exchange. It's the highest settlement since Oct. 16. Prices climbed 4.5 per cent this week and 3.3 per cent this month. The volume of all futures traded was 21 per cent below the 100-day average at 2:45 p.m.
Brent for December settlement rose 76 cents, or 1.6 per cent, to end the session at $49.56 a barrel on the London- based ICE Futures Europe exchange. The European benchmark crude closed at a $2.97 premium to WTI.
With files from Reuters