Canada’s main stock index slid lower on Tuesday, despite a jump in energy stocks as oil prices gained on Saudi Arabia’s unexpected commitment to extend production cuts in June to help drain a supply glut built up due the coronavirus crisis.
The Toronto Stock Exchange’s S&P/TSX composite index was unofficially down 222.06 points, or 1.47%, at 14,888.16. The index rose as high as 15,184.87 earlier in the session.
The utilities sector slid 2.2%, while the financial and materials sectors dipped 2% and 0.6%, respectively.
The energy sector climbed 1.2% after U.S. West Texas Intermediate (WTI) crude futures settled at $25.78 a barrel, up $1.64, or 6.8%. Brent crude futures settled at $29.98 a barrel, gaining 35 cents, or 1.2%.
OPEC and its allies, a group known as OPEC+, decided in April to cut output by 9.7 million barrels per day (bpd) for May and June, a record reduction, in response to the 30% drop in fuel demand worldwide caused by the coronavirus pandemic. The group was expected to curtail that reduction to 8 million bpd, but sources told Reuters they instead expect OPEC+ to maintain the larger reduction.
On Tuesday, four sources told Reuters that OPEC and its allies want to maintain the 9.7 million bpd cut beyond June, when the OPEC+ group is next due to meet.
“They don’t want to reduce the size of the cuts,” one OPEC+ source told Reuters.
The S&P 500 closed lower after a choppy session on Tuesday as investors took profits following a warning from the top U.S. infectious disease expert that premature moves to reopen the nation’s economy could lead to novel coronavirus outbreaks and set back economic recovery.
Investors were weighing the potential for a second wave of virus infections against hopes that easing of stay-at-home restrictions could ignite a recovery in the U.S. economy, which has been severely damaged by the virus.
Anthony Fauci, the director of the National Institute of Allergy and Infectious Diseases, told Congress that the virus, which has already killed 80,000 Americans, was not yet under control and that there would not likely be a treatment or vaccine in place by late August or early September.
And reports of new clusters of coronavirus infections in countries such as China, South Korea and Germany where lockdowns had been lifted appear to have added to worries.
Optimism about an economic recovery and massive stimulus measures have already helped the S&P 500 climb about 34% to Tuesday’s intraday high from the March 23 low of the pandemic-driven selloff.
“It goes back to science versus the Federal Reserve. The Federal Reserve has been supportive of the market ... What’s going to win here?,” said Phil Blancato, chief executive of Ladenburg Thalmann Asset Management in New York.
“From the science viewpoint if we open too quickly, we’ll just go back to where we were. But if we don’t open at all, we have this economic malaise.”
So, with concerns about potential for declines, participants like Dennis Dick, proprietary trader at Bright Trading LLC in Las Vegas, were anxious to lock in their profits.
“This market today is playing it a little safer,” he said. “People are very nervous about how the reopening is going to go.”
Unofficially, the Dow Jones Industrial Average fell 1.73% to end at 23,803.51 points, while the S&P 500 lost 1.87%, to 2,875.46.
The Nasdaq Composite dropped 1.86%, to 9,021.36.
Tuesday’s data showed that U.S. consumer prices dropped by the most since the Great Recession in April, due to a plunge in demand for gasoline and services including airline travel as people stayed home during the coronavirus crisis.
But prices for food consumed at home rose 2.6% in the largest advance since February 1974, leaving some investors anxious about the prospect of stagflation, if consumers cannot keep up with price increases for essentials.
“What happens if the cost of essential goods get more expensive and you’re not earning enough money. That could become really problematic,” said Ladenburg Thalmann’s Blancato.
Helping to drag down the financial sector was a big decline in BlackRock Inc, after its top shareholder PNC Financial Services Group Inc said it planned to sell its entire 22% stake in the world’s largest asset manager.
Online food delivery company GrubHub Inc surged after a person familiar with the matter said Uber Technologies Inc was in advanced talks to buy the company in an all-stock deal.
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