North American bond yields rose Wednesday as concerns about recession hitting the world’s largest economy eased amid a solid round of economic data, while the Bank of Canada offered up surprisingly hawkish commentary about the course of monetary policy. Both U.S. and Canadian stock markets ended lower after a choppy day of trading that saw energy stocks once again rally.
Benchmark U.S. 10-year Treasury yields hit two-week highs of 2.951%. The Canadian 5-year bond, influential on the setting of fixed mortgage rates, was yielding nearly 2.9% by late day, up 14 basis points, in a retest of multi-year highs from earlier this spring.
The Bank of Canada hiked its key policy rate by 50 basis points on Wednesday and said it was willing to “act more forcefully,” an indication that it isn’t ruling out a 75-basis-point hike at a future meeting.
In the U.S., data showed that while job openings fell in April, they remained at high levels. U.S. manufacturing activity picked up pace faster than expected in May as demand for goods remained strong. And a Fed report showed the economy in most U.S. regions expanding at a modest or moderate pace from April through late May.
Investors have been watching economic data closely for clues as to what it might mean for interest rates.
“There wasn’t any information to be found in today’s releases that’s likely to lead the Federal Reserve to become any less aggressive or to tone down its hawkishness in its rate hike campaign,” said Mark Luschini, chief investment strategist, Janney Montgomery Scott.
St. Louis Federal Reserve Bank President James Bullard, a voter at this year’s Federal Open Market Committee, said on Wednesday that it is “too early” to call a peak in inflation, warning that in past periods of high inflation, price pressures receded for months but then reasserted themselves.
Stocks may trade sideways until the market has more clarity on inflation, the consumer’s ability to keep absorbing higher prices and resulting Fed actions, said Luschini.
“There’s nothing imminent, that seems likely to catalyze shedding all the worries that have driven the market down to the levels that we’re at right now,” he said.
The S&P 500 lost 30.92 points, or 0.75%, to 4,101.23. The Dow and Nasdaq also lost ground.
Among the S&P’s 11 major industry sectors energy was the sole gainer, finishing up 1.8% as oil prices rose.
The biggest laggards were financials, down 1.7%, and healthcare, which was the biggest drag on the S&P 500, finishing down 1.4%. The consumer staples sector lost 1.3% while materials and real estate also closed down more than 1%.
Uncertainty about Fed policy, the war in Ukraine and prolonged supply chain problems stemming from COVID-19 lockdowns in China have hammered stocks, with the benchmark S&P 500 index falling almost 14% year-to-date.
Late in the session, Meta Platforms tumbled and was the second-biggest drag on the S&P after Chief Operating Officer Sheryl Sandberg said in a Facebook post that she would leave the company after 14 years. It closed down 2.6%.
Salesforce finished up 9.9% after the enterprise software firm raised its full-year adjusted profit outlook and said it did not see any material impact from the uncertain broader economic environment.
Victoria’s Secret climbed 8.9% after the lingerie retailer beat first-quarter profit estimates as costs fell.
Declining issues outnumbered advancing ones on the NYSE by a 1.64-to-1 ratio; on Nasdaq, a 1.90-to-1 ratio favored decliners. The S&P 500 posted one new 52-week highs and 29 new lows; the Nasdaq Composite recorded 29 new highs and 124 new lows. On U.S. exchanges, 11.45 billion shares changed hands compared with the 13.25 billion average for the last 20 sessions.
The S&P/TSX composite index ended down 15.62 points at 20,713.72. It was the second straight decline for the index after it posted on Monday its highest closing level in nearly four weeks.
The TSX energy sector rose 1.9% as the price of oil settled 0.5% higher at $115.26 a barrel.
The industrials group was up 1% as shares of CAE Inc climbed 7.7% after reporting quarterly results that beat estimates. Technology ended 2.1% lower.
Energy and materials shares have performed strongly since the start of the year, while technology, which is sensitive to higher interest rates, has been one of the major laggards.
Globe staff, Reuters
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