Canadian stocks fell on Friday, snapping a four-day rally to pare a weekly advance as crude dropped below $30 a barrel in New York and retail sales tumbled the most in more than five years.
The Standard & Poor's/TSX Composite Index dropped 0.9 per cent, or 118 points, to 12,8134 in Toronto, trimming a climb this week to 3.5 per cent. Canada's benchmark equity gauge remains the best-performing developed market in the world in 2016 with a decline of 1.4 per cent, after being among the worst in the past year. The S&P/TSX slid into a bear market last month as crude prices collapsed due to a global supply glut.
Losses were broad, with eight of the 10 main sectors falling.
Encana Corp. tumbled 10.9 per cent as energy producers fell 1.7 per cent for a second day of losses. New York crude returned to levels below $30 a barrel, slumping as much as 5.6 per cent. U.S. crude supplies expanded to the highest level in more than eight decades, according to government data Thursday.
Valeant Pharmaceuticals International Inc. dropped 9.6 per cent. David Maris, analyst at Wells Fargo Securities, said there are many "unanswered questions" about the company's strategic direction and forecast as he initiated coverage of the stock with an underperform, the equivalent of a sell.
Valeant, briefly the largest company in the S&P/TSX by market capitalization last year, has slumped 64 per cent from an August high amid intense scrutiny from investors and lawmakers surrounding its pricing practices.
Dream Office REIT surged 12.7 per cent, the most since 2008, after saying yesterday it plans to sell about C$1.2 billion in assets in the next three years, and it cut its annualized distribution by 33 per cent. The stock was also raised to an "action list buy" from "buy" at TD Securities.
Boardwalk REIT rose 11 per cent on the day.
Canadian retail sales fell 2.2 per cent in December, the fastest since 2010, exceeding all 20 forecasts in a Bloomberg News survey that had a median estimate of a 0.9-per-cent fall. Motor vehicle and parts sales fell 3.9 per cent to $11-billion, including a 6.7-per-cent drop in a category that includes snowmobiles.
U.S. stocks closed little changed to finish the strongest weekly advance since November, with gains in technology and consumer shares offsetting declines among commodity producers amid a drop in crude oil.
The Standard & Poor's 500 Index lost less than 0.1 per cent to 1,917.63 in New York, slipping for a second day while still gaining 2.8 per cent for the week. The Nasdaq Composite Index, rose 0.2 per cent, wiping out an early drop of as much as 0.7 per cent.
"We got overextended to the downside last week, we've had a pretty decent bounce off of those oversold levels and now we're at an overbought condition," said Michael James, managing director of equity trading at Wedbush Securities Inc. in Los Angeles. "I'm not surprised to see a pullback yesterday and a continued pullback today."
Investors were able to mostly shrug off oil's biggest drop in a week, with the impact not spreading too deeply beyond energy and raw-materials shares, offering further evidence that once-tight market correlations were easing.
"The oil situation is really just a supply issue," said Rob Lutts, president of Massachusetts-based Cabot Wealth Management Inc. "The demand for energy is still relatively robust globally. I think investors maybe start focusing on that and pulling away from the concept that low oil prices mean global trouble everywhere."
Equities had rallied in near-vertical fashion for three sessions, sending the the S&P 500 up more than 5 per cent after the gauge last week reached the lowest level since April 2014, and the Nasdaq Composite Index came within 1 per cent of reaching a bear market. The rebound was led by the year's most beaten- down sectors, including banks, technology and retailer shares, which lost momentum yesterday along with energy producers to pace a retreat.
The S&P 500 had cut its 2016 decline nearly in half, though it's still down more than 10 per cent from a May record and 6.2 per cent this year amid signs of weakness in the global economy and falling commodity prices.
Investors have been scrutinizing economic data for any signs that slower growth abroad, particularly in China, is spreading. A report today showed the cost of living in the U.S. excluding food and fuel increased in January by the most in more than four years, reflecting broad-based gains that signal companies may be getting some pricing power. Total prices were little changed, depressed by the continued plunge in energy costs.
Oil dropped below $30 a barrel in New York after U.S. crude stockpiles rose to the highest level in more than eight decades.
West Texas Intermediate oil lost 3.7 per cent, eroding a weekly gain. U.S. supplies expanded to 504.1 million barrels, the highest level since 1930, according to the Energy Information Administration. Saudi Arabia and Russia have proposed freezing output amid a worldwide surplus. Iraq said Thursday it backs any decision to support prices and balance the market without indicating whether it would cap its own output.
"We're seeing follow-through from yesterday's inventory report," said Bob Yawger, director of the futures division at Mizuho Securities USA in New York. "There's a battle over the direction of the market. On one side, you have what may be the beginnings of an OPEC agreement to curb supply versus very bearish news on the storage side."
Crude is down 20 per cent this year after the Organization of Petroleum Exporting Countries abandoned output targets in early December amid swelling U.S. stockpiles and as Iran sought to boost exports to regain market share after sanctions were lifted. Companies are confronting rating downgrades and oil- producing nations face bigger-than-expected withdrawals from wealth funds to cover budget deficits as energy revenues fall.
WTI for March delivery, which expires Monday, declined $1.13 to settle at $29.64 a barrel on the New York Mercantile Exchange. Prices increased 0.7 per cent this week. The more- active April futures dropped $1.18 to $31.75.
Brent for April settlement fell $1.27, or 3.7 per cent, to $33.01 a barrel on the London-based ICE Futures Europe exchange. Prices slipped 1 per cent this week. The European benchmark oil closed at a $1.26 premium to April WTI.
An index of global equities fell for the first time in six days. Treasuries fell and the dollar strengthened after a report showed the cost of living in the U.S. excluding food and fuel increased by the most since 2011, reinforcing the Federal Reserve's message that inflation will rise toward its target.
Nationwide crude stockpiles increased by 2.15 million barrels through Feb. 12, the EIA said. Inventories are at a record high in weekly data that started in August 1982. Supplies haven't been at this level since 1930, based on monthly records dating back to 1920.
"If you look at the seasonal trend over the last five years we're going have 560 million barrels in commercial storage by late April," said Bill O'Grady, chief market strategist at Confluence Investment Management in St. Louis, which oversees $3.4 billion in assets.
With a file from Reuters