|Globe Investor | September 4, 2015|
The close: TSX falls amid U.S. rate uncertainty
Wall St ends down after mixed jobs data
Canadian stocks fell on Friday, capping a weekly slide, as U.S. payroll data gave no indication the Federal Reserve will hold off on raising interest rates.
Canadian shares declined 0.9 per cent at 4 p.m. in Toronto, joining losses among markets around the world. A gauge of developed and developing equity markets retreated as the benchmark Standard & Poor’s 500 index slumped 1.5 per cent in New York.
U.S. employers added 173,000 workers in August as the jobless rate dropped to 5.1 per cent, the lowest since April 2008 and a level that the Federal Reserve considers to be full employment. The Canadian economy unexpectedly added jobs in August and the jobless rate ticked higher as more people returned to the labor force, making it unlikely the Bank of Canada will cut interest rates a third time this year.
The Standard & Poor’s/TSX Composite Index fell 118.10 points to 13,478.31, extending a weekly decline to 2.8 per cent. The equity gauge has dropped 7.9 per cent in 2015. Canadian equity markets will be closed Monday for the Labor Day holiday.
The gain in U.S. payrolls, while less than forecast, follows advances in July and June that were stronger than previously reported, according to the Labor Department Friday.
Canada’s economy added 12,000 jobs, mostly full-time work in services such as education and health-care. The unemployment rate rose to 7 percent from 6.8 percent as more Canadians entered the work force.
“While a rate cut at the Bank of Canada’s Sept. 9 meeting is a possibility, it seems unlikely,” said William Adams, a senior international economist at PNC Financial Services Group, in a note to clients. “The approach of an interest rate hike from the U.S. Federal Reserve will keep continued downward pressure on the Canadian dollar.”
TransCanada Corp. fell 1.5 per cent and Canadian Natural Resources Ltd. dropped 3.1 per cent as energy producers declined 0.7 per cent as a group. Crude futures slipped 1.5 per cent in New York, paring a second weekly advance amid signs of a persisting global surplus.
Teck Resources Ltd. tumbled 9.2 per cent and First Quantum Minerals Ltd. lost 6.3 per cent as copper prices dropped the most in eight weeks after German factory orders declined in July.
The resource-rich S&P/TSX has been one of the worst- performing developed markets in the world this year as crude plunged. Energy and raw-materials producers have the biggest declines among 10 industries in the S&P/TSX this year.
BlackBerry Ltd. fell 2 per cent, erasing an earlier gain, after agreeing to acquire mobile technology solutions company Good Technology for $425-million in cash.
U.S. stock indexes ended down more than 1 per cent on Friday after a mixed August jobs report did little to quell investor uncertainty about whether the Federal Reserve will increase interest rates this month.
The Standard & Poor’s 500 Index lost 1.5 per cent to 1,921.22 at 4 p.m. in New York. The benchmark index slid 3.4 per cent for the week, its second-worst performance since December. The Dow Jones Industrial Average fell 272.38 points, or 1.7 per cent, to 16,102.38. Equity markets will be closed Monday for Labor Day. Trading on U.S. exchanges was 10 per cent below the three-month average.
It’s “a glass-half-empty kind of day,” said Patrick Blais, a fund manager at Manulife Asset Management Ltd. in Toronto. He helps manage about $280-billion at the firm. “Right now there’s a lot of nervousness so it’s natural for the market to react aggressively.”
In the U.S. stock market, the S&P 500 had its sixth decline exceeding 1 per cent in 12 days. Prior to that there’d been 10 such declines since January. The benchmark gauge has moved up or down by an average of more than 2 per cent a day since falling out of its 2015 trading range on Aug. 20 -- almost four times as much as in the prior nine months.
September is historically the worst month of the year for the S&P 500, with the equity gauge falling 1.1 per cent on average based on data going back to 1927, according to data compiled by Bloomberg.
“There’s a risk-off mentality rather than a risk-on one going into a three-day weekend for the U.S. and after the Chinese markets have been closed for four days,” Mark Spellman, a fund manager who helps oversee $4.2-billion at Alpine Funds in Purchase, NY., said by phone. “The weakness in the market is due primarily to continued global growth concerns.”
Financial markets have been unable to shake off volatility that’s jolted markets amid concern China’s slowdown will spread. The Dow yesterday erased a rally of nearly 200 points as optimism over the European Central Bank’s revamp of quantitative easing faded. The gauge surged 1.8 per cent Wednesday after tumbling 2.8 per cent the day before.
Research from a JPMorgan Chase & Co. strategist this week argued that robotic selling by quantitative investment funds tuned to volatility and price trends -- which contributed to last month’s losses in U.S. stocks -- is only about halfway completed. Marko Kolanovic said such traders probably have to get rid of another $100-billion in stocks in the next one to three weeks.
Data Friday showed U.S. employers added 173,000 workers in August and the jobless rate dropped to 5.1 per cent. The gain in payrolls, while less than forecast, followed advances in July and June that were stronger than previously reported. The unemployment rate is the lowest since April 2008. Average hourly earnings climbed more than forecast and workers put in a longer workweek, the report also showed.
The jobs report is the last major data point before the Fed meets later this month on Sept. 16-17 to discuss the timing of its first increase in interest rates in nearly a decade. Investors raised bets on a September liftoff to 30 per cent from 26 per cent before the jobs data, while that’s still less than the 48-per-cent odds predicted before China devalued the yuan on Aug. 11.
“This is the first time the market has looked at a Fed meeting and really has no idea what the Fed is going to do,” said Mark Kepner, an equity trader at Themis Trading LLC in Chatham, NJ. “Right now you’re looking at the overall uncertainty and that’s what’s hanging on the market. I don’t think this number in and of itself changes how somebody’s going to vote.”
All 10 major industries in the S&P 500 fell more than 1.1 per cent, with financial and raw-material shares dropping at least 1.9 per cent. Goldman Sachs Group Inc. and JPMorgan Chase & Co. lost more than 1.9 per cent to lead declines among the largest banks.
Netflix Inc. slid for the sixth consecutive day, losing 2.3 per cent. The stock is down 16 per cent since Aug. 27, after more than doubling from the beginning of the year.
Freeport-McMoRan Inc. tumbled 4.2 per cent as copper dropped that most in eight weeks after Germany factory orders fell more than expected in July.
Caterpillar Inc. lost 1.8 per cent after the stock was downgraded to neutral from outperform at Robert Baird by equity analyst Mircea Dobre. Joy Global Inc. fell 1.4 per cent, a day after it plunged the most in six years after cutting its 2015 outlook amid the global commodity downturn.
With files from Bloomberg
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