Trader Thomas McCauley, right, works on the floor of the New York Stock Exchange Oct. 29.Richard Drew/The Associated Press
Canadian stocks slumped on Thursday, paring the best monthly gain since February, as Bombardier Inc. plunged after receiving a $1-billion investment from the Quebec government and resource producers sank on the prospect of higher interest rates in America.
The Standard & Poor's/TSX Composite Index fell 70.12 points, or 0.51 per cent, to 13,793.04 in Toronto. The index's October gain would be its best month since February.
Bombardier, the third worst-performing stock in the S&P/TSX this year with a 68-per-cent decline, dropped 17.4 per cent to the lowest since Sept. 9.
The jet maker's tardy and over-budget C Series program will get an investment from Quebec in exchange for a 49.5-per-cent stake and as much as 200 million Bombardier shares, the Montreal-based company said Thursday.
Potash Corp. of Saskatchewan Inc. lost 2.95 per cent to lead raw-materials producers lower. The world's largest fertilizer producer by market value cut its full-year profit forecast and shuttering reducing production in response to weaker demand from emerging markets.
Barrick Gold Corp. jumped to 15.8 per cent to a two-month high after reporting better-than-estimated profit after the market close yesterday. Barrick's lower costs and higher production helped to mitigate the impact of weak metals prices. Some 150 companies are scheduled to report earnings next week.
Gold stocks have rallied 14 per cent in October, on pace for the best performance since January as the prospect of an interest-rate increase from the Fed dimmed during the month amid slowing global economic growth and mixed U.S. data. Gold becomes a less attractive investment when rates rise as the metal doesn't pay interest.
Valeant Pharmaceuticals International Inc dropped 3.65 per cent as its largest shareholder defended its investment in the embattled drug-maker, saying allegations against the company are false and that there is no legal case preventing ties to a specialty pharmacy.
Fund manager Ruane, Cunniff & Goldfarb Inc, which has a history is entwined with legendary investor Warren Buffett, owns a 9.93-per-cent stake in Valeant as of June 30, Thomson Reuters data show. The data also show that the Valeant stake comprises one-third of Ruane, Cunniff & Goldfarb's overall holdings - a much higher than normal exposure to a single stock.
After coming under pressure this summer, Valeant's stock plunged after short-seller Citron Research said last week that the company was using its drug distributor, specialty pharmacy Philidor, to inflate revenue numbers.
A rally in U.S. stocks stalled Thursday, after equities reached a two-month high, as investors weighed corporate earnings and prospects for higher interest rates this year.
The Standard & Poor's 500 Index lost 0.96 points, or 0.05 per cent, to 2,089.39 in New York, near the highest level since Aug. 18, after briefly erasing losses in the final half hour. The gauge is up 8.8 per cent in October, poised for its best month in four years, boosted by gains in commodity producers and technology shares.
The Dow Jones industrial average fell 22.92 points, or 0.13 per cent, to 17,756.6, while the Nasdaq Composite dropped 21.42 points, or 0.42 per cent, to 5,074.27.
"It's merely a re-evaluation of how people should be positioned given the Fed commentary yesterday," said Michael James, managing director of equity trading at Wedbush Securities Inc. in Los Angeles. "The door was left open for a rate hike in December, which is likely to lead to a much higher dollar. That won't be a good read for anyone doing business internationally."
Fed officials Wednesday forecast moderate growth, and dropped a reference to global risks in a policy statement following a two-day meeting. They also referred to their "next meeting" on Dec. 15-16 as they discussed the timing for raising interest rates. Traders are now pricing in a 52-per-cent chance of liftoff in December, compared with as low as 30 per cent last week. Prior to the Fed meeting, March was the first month showing at least even odds for a rate increase.
Data continues to be the Fed's guide toward an eventual rate boost, and a report today showed the economy expanded at a slower pace in the third quarter as companies took advantage of gains in consumer and business spending to reduce bloated stockpiles. A separate measure showed contract signings to purchase previously owned homes unexpectedly fell in September by the most since the end of 2013, indicating the residential real estate market is cooling from its recent brisk pace.
The S&P 500 has rebounded as much as 12 per cent from an August low, rising Wednesday to its highest since Aug. 18 amid gains in banks and oil companies. The October rally has been spurred by advances in energy and raw-material shares, the same groups that helped drag the index to its worst quarter since 2011. Both are headed for their strongest monthly increase since 2011 amid easing concern that weakness in China will spread.
"More people want to get into energy and get into the space, they just don't know what the right time will be," Adam Lustig, a managing director at Raymond James & Associates Inc. said by phone. "Not many think 2016 will be good for the space but they think 2017 will and we're starting to see people initiate early."
Corporate earnings season remains an influence on investor sentiment, with a little less than half of the companies in the S&P 500 yet to report. Of those that have reported, 76 per cent beat profit projections, while 55 per cent missed sales estimates. Chevron Corp., Exxon Mobil Corp. and Colgate- Palmolive Co. are among 21 companies scheduled to release results on Friday.
Oil steadied after its biggest rally in eight weeks in New York as the focus shifted from rising U.S. refinery demand to the prospects for a U.S. interest rate gain this year.
Futures edged 0.3 per cent higher after surging 6.3 per cent Wednesday. U.S. refiners boosted operating rates last week, according to an Energy Information Administration report Wednesday. Odds the Federal Reserve will move on rates at their next meeting jumped to 50 per cent from around 32 per cent a week ago, based on futures prices, after officials signalled they're prepared to tighten. Data showed American economic growth slowed last quarter.
"The oil market is being held back by macroeconomics," Phil Flynn, senior market analyst at the Price Futures Group in Chicago, said. "We rose strongly on the refinery utilization number yesterday and the outlook for rising crude demand. That couldn't be maintained when the disappointing GDP number sent stocks lower."
Oil failed to sustain a gain above $50 a barrel earlier this month as the global glut showed little sign of easing any time soon. U.S. crude stockpiles are more than 100 million barrels above the five-year seasonal average, EIA data show. The Organization of Petroleum Exporting Countries continues to pump above its quota and the International Energy Agency estimates the surplus will remain until at least the middle of 2016.
West Texas Intermediate for December delivery increased 12 cents to close at $46.06 (U.S.) a barrel on the New York Mercantile Exchange. It's the highest close since Oct. 16. The contract gained $2.74 on Wednesday, the most since Aug. 31. The volume of all futures traded was 3.2 per cent above the 100-day average at 2:56 p.m.
Brent for December settlement dropped 25 cents, or 0.5 per cent, to end the session at $48.80 a barrel on the London- based ICE Futures Europe exchange. The European benchmark crude closed at a $2.74 premium to WTI.
"We're seeing a bit of a hangover after yesterday's huge move," Stephen Schork, president of the Schork Group Inc. in Villanova, Pa., said. "Demand for crude is going to pick up because refineries are finishing maintenance."
With a file from Reuters