The Toronto stock index dipped into the red as plunging oil prices outweighed gains in financials on Wednesday, while the loonie fell nearly half a cent following the Bank of Canada's latest decision to keep interest rates on hold.
The S&P/TSX composite index was down 6.90 points to 15,908.70. Gains by several of Canada's biggest lenders – including Bank of Montreal, Bank of Nova Scotia and Royal Bank of Canada – weren't enough to compensate for a nose-diving energy sector, which was down more than two per cent at the closing of markets.
The January crude contract tumbled US$1.66 to US$55.96 per barrel, a sharp decline that Allan Small, senior investment adviser at HollisWealth, partially attributed to "artificially" inflated prices based on OPEC and non-OPEC members' manipulation of production levels.
The Organization of the Petroleum Exporting Countries cartel and a group of allied oil-producing nations agreed last week to extend crude output cuts until the end of next year, continuing a policy that led to a significant rise in the price of oil over the past year.
"If they were producing at normal rates, the price of oil would probably be around US$35 to US$40," Small said. "But obviously they're cutting back and trying to keep the price of oil higher."
"Meanwhile, the United States is producing at record levels," he added.
South of the border, American markets – which had held steady for most of Wednesday following drops for markets around the world – finished the trading session mixed.
In New York, the Dow Jones industrial average fell 39.73 points to 24,140.91. The S&P 500 index was down 0.30 of a point to 2,629.27 and the Nasdaq composite index was up 14.17 points to 6,776.38.
In currency markets, the Canadian dollar closed at an average trading price of 78.39 cents US, down 0.47 of a U.S. cent after the Bank of Canada stuck with its trend-setting interest rate Wednesday – but it offered fresh, yet cautious, warnings to Canadians that increases are likely on the way.
The central bank has now left the rate locked at one per cent for two straight policy announcements after the strengthening economy prompted it to raise it twice in the summer.
"I'm very happy about that. The last thing I think we wanted to do as a nation for the economy is to get in front of the (U.S. Federal Reserve), for us to start raising rates further before the Fed does," said Small. "Because then you'd see our loonie at 85 cents (US) .... and that wouldn't do anyone any good."
"The Band of Canada did a wise thing not to raise rates. Let the U.S. raise rates in December. Let our dollar fall down to 75 cents. It's a good thing for our economy. A weaker dollar makes a lot of sense," he said.
Elsewhere in commodities, the January natural gas contract was up one cent at US$2.92 per mmBTU, the February gold contract added US$1.20 to US$1,266.10 an ounce and the March copper contract was up two cents to US$2.96 a pound.
Tech recovers, but not enough to push Wall Street higher
The S&P 500 fell a tiny bit on Wednesday, with Microsoft and other technology stocks making modest gains but not quite offsetting losses in energy shares after oil prices dropped more than 2 per cent.
It was the index's fourth straight negative session, the first such streak since March, underscoring investor uncertainty as U.S. Senate Republicans attempt to reconcile their version of a tax-cut bill with that of the House of Representatives.
"It's hard to speculate on what the final bill is going to say," said Sean O'Hara, director at Pacer Financial Inc.
The bill passed on Saturday by Republican senators included a last-minute change to retain the corporate alternative minimum tax, or AMT, which had initially been removed.
Including the AMT could negate parts of the bill seen as beneficial to tech companies and other corporations.
Shares of Microsoft
"Energy has had a mini-surge over the past month or so, and so I think this inventory build is being viewed as an opportunity to take some profits," said Mike Baele, managing director at U.S. Bank Private Client Wealth Management in Portland, Oregon.
The Dow Jones Industrial Average <.DJI> ended down 0.16 per cent at 24,140.91 while the S&P 500 <.SPX> lost 0.01 per cent to 2,629.27.
The Nasdaq Composite <.IXIC> added 0.21 per cent to 6,776.38.
Fuelled by strong earnings growth and optimism that President Donald Trump will cut corporate taxes, the S&P 500 has surged 17 per cent in 2017.
The index is trading at 18.4 times expected earnings, the multiple's highest level since 2002, according to Thomson Reuters Datastream. But many investors expect steep corporate tax cuts to boost earnings, thereby making stocks relatively less expensive.
During Wednesday's session, Home Depot
Declining issues outnumbered advancing ones on the NYSE by a 1.36-to-1 ratio; on Nasdaq, a 1.89-to-1 ratio favoured decliners.
About 6.3 billion shares changed hands on U.S. exchanges, just below the 6.6 billion daily average for the past 20 trading days, according to Thomson Reuters data.