Canada’s main stock ended slightly lower on Thursday after five straight days of gains, as investors grew more worried about the economic outlook and a sharp drop in the price of oil weighed on energy shares.
The S&P/TSX composite index ended down 4.82 points at 20,053.07.
The benchmark index gained 2.7% over the previous five sessions as market sentiment improved on hopes that the U.S. Federal Reserve was done raising interest rates.
Wall Street’s major indexes ended mixed after disappointing earnings forecasts from Cisco and major retailer Walmart.
The problem for investors is that interest rates are peaking “because there’s a potential recession coming,” said Greg Taylor, portfolio manager at Purpose Investments. “The Walmart numbers this morning are (triggering) a little more caution on the overall economy.”
The energy sector lost 1.9% as oil tumbled to its lowest level since July 7 following weak data from the U.S. and Asia.
“It’s a sell-off that’s accelerating,” said Colin Cieszynski, chief market strategist at SIA Wealth Management. “What we are getting is growing concerns about demand.”
U.S. crude oil futures settled 4.9% lower at $72.90 a barrel. OPEC and the International Energy Agency have both predicted oil supply tightness in the fourth quarter, but U.S. data on Wednesday showed inventories were abundant.
“The mood is negative, the charts are negative,” said Phil Flynn, an analyst at Price Futures Group. “It’s going to take something to change that mood, and until then people will ride it down until they realize it’s overdone.”
The price of gold, meanwhile, rose 1.1% Thursday to about $1,980 per ounce. That helped the TSX materials group, which includes precious and base metals miners and fertilizer companies. It advanced 1.1%, while industrials were up 0.6%.
Canadian government bond yields fell across the curve, tracking moves in U.S. Treasuries. The Canada 10-year touched its lowest level since Sept. 14 at 3.662% before recovering to 3.692%, down 6 basis points on the day.
On Wall Street, shares of Cisco Systems tumbled 9.8% as the communications and networking technology company cut its full-year revenue and profit forecasts on slowing demand for its networking equipment. Also in technology, Palo Alto Networks shares fell 5.4% after its forecast late Wednesday for second-quarter billings missed expectations.
Walmart shares sank 8.1% a day after touching a record high. The retail giant said U.S. consumers were spending cautiously because of inflation, even as it raised its annual forecast for sales and profit.
This helped send the S&P 500 consumer staples index down 1.2% and weighed on retailers with Dollar General and Dollar Tree both falling 4.2%.
Also, Target fell 0.4%, giving back some gains from the previous session in which it soared 17.8% after providing a bullish strong holiday-quarter outlook.
Earlier this week, Wall Street indexes had rallied sharply with data signaling cooling U.S. inflation and fueling hopes the U.S. Federal Reserve is done hiking interest rates. Also, passage this week of a stop-gap bill to avert a government shutdown eased some nerves.
Given that Cisco and Walmart are “a backbone of their respective industries,” Paul Nolte, senior wealth adviser and market strategist at Murphy & Sylvest said their weakness “calls a little bit into question the health of the consumer and maybe the health of the technology sector.”
But others noted positive counter forces in Thursday’s session, with gains in megacaps including Microsoft Corp , Apple Inc and Nvidia.
“The major indexes are pretty much flat on the day, but you’re still seeing a lot of strength in big-cap tech or growth. It’s just a continuation of the positive narrative we’ve seen in the market recently,” said Tim Ghriskey, senior portfolio strategist at Ingalls & Snyder in New York.
Specifically, Ghriskey cited investor relief that the Federal Reserve appears to be done with its rate hiking cycle.
A Labor Department report Thursday showed weekly jobless claims had risen more than expected, cementing bets that the Fed will not need to raise rates further.
The Dow Jones Industrial Average fell 45.74 points, or 0.13%, to 34,945.47, the S&P 500 gained 5.36 points, or 0.12%, to 4,508.24 and the Nasdaq Composite added 9.84 points, or 0.07%, to 14,113.67.
Energy, down 2.1% led declines among the 11 major S&P sectors, hitting a four-month low. Communications services rose 0.9% was the sector with the strongest advance during the session followed by information technology, up 0.7%.
“The big driver today is the tug-of-war between those who want to sell on rallies and those who want to buy on dips,” said Brian Jacobsen, chief economist at Annex Wealth Management.
“Economic data hasn’t been bad enough to trigger too many recession fears, but it hasn’t been good enough to engender too much enthusiasm. We’re entering a period with the holidays where small surprises can have outsized influences on prices.”
Money markets have fully priced in a probability that the Fed will hold rates steady in December, and see about a 62% chance of a rate cut in May of at least 25 basis points, according to CME Group’s FedWatch tool.
Among individual stocks, Macy’s shares rallied 5.7% after the department store operator’s quarterly sales beat analysts’ estimates.
Declining issues outnumbered advancing ones on the NYSE by a 1.42-to-1 ratio; on Nasdaq, a 1.97-to-1 ratio favored decliners. The S&P 500 posted 15 new 52-week highs and 2 new lows; the Nasdaq Composite recorded 40 new highs and 123 new lows. On U.S. exchanges 10.71 billion shares changed hands compared with the 11.09 billion average for the last 20 sessions.
Reuters, Globe staff