Canada’s main stock index fell on Monday as investors took measure of recent gains ahead of domestic data this week that could provide clues on the persistence of inflation. Wall Street indexes closed out the session near the unchanged mark as rising Treasury yields dented the appetite for technology stocks.
The Toronto Stock Exchange’s S&P/TSX composite index ended down 85.45 points, or 0.4%, at 21,683.08. On Friday, the TSX posted a record closing high of 21,768.53.
“I just think people are taking a bit of a breather here,” said Michael Sprung, president at Sprung Investment Management.
“Investors are beginning to worry that inflation is not going to be as temporary or as low as originally had been hoped.”
Canada’s inflation report for October is due on Wednesday. In September, inflation climbed to an 18-year high of 4.4%.
While inflation risks have increased - driven by pandemic-induced demand shifts, supply disruptions and higher energy prices - the Bank of Canada continues to view the recent dynamics as transitory, Governor Tiff Macklem said in a newspaper opinion piece.
Still, money markets are betting that the central bank will hike interest rates as many as five times next year.
The TSX technology group fell 0.8% and financial services ended 0.5% lower. Financials account for about 30% of the Toronto market’s value.
Industrials were down 0.9%, while the materials group, which includes precious and base metals miners and fertilizer companies, lost 0.4%.
Among stocks, Burger King-parent Restaurant Brands International Inc gained 1.9%. The company said it would buy U.S. restaurant chain Firehouse Subs for $1 billion in an all-cash deal.
Pot producer Trulieve Cannabis Corp surged to its highest level since July 2021 after it reported a 64.4% jump in quarterly revenue, but gave back much of its gains.
On Wall Street, the technology sector, down 0.11%, was among the biggest drags on the day as U.S. Treasury yields moved higher, with the yield on the benchmark 10-year U.S. Treasury note touching its highest level since Oct. 27. Higher Treasury yields tend to weigh on high-growth areas such as tech, as they discount future earnings from the sector.
Bank stocks, which benefit from climbing yields, advanced with bond yields on the rise as investors positioned for the potential effects of the Federal Reserve’s tapering of its massive asset purchases and ahead of a scheduled sale of new 20-year bonds later in the week.
“Wall Street is completely fixated over what is happening in the bond market. We are starting to see yields are rising and that will, ultimately, signal that there’s a lot more nervousness that the Fed could be a little bit late to the game on delivering a rate hike and will be forced to react a lot quicker, given the inflationary pressures,” said Ed Moya, senior market analyst at OANDA.
“You’re seeing mixed trade right now because, while a lot of traders are focused on whether these inflationary pressures will keep Treasuries or rates climbing, you’re also seeing manufacturing improve in the Empire State and a lot more optimism from abroad.”
Data on Monday showed manufacturing activity in New York surged to 30.9 in November, well above the prior 19.8 reading and 21.2 estimate.
The Dow Jones Industrial Average fell 12.86 points, or 0.04%, to 36,087.45, the S&P 500 lost 0.05 point, or flat, to 4,682.80 and the Nasdaq Composite dropped 7.11 points, or 0.04%, to 15,853.85.
Focus this week will be on earnings reports from several major retailers including Walmart Inc, Target Corp, Home Depot Inc and Macy’s Inc. Their results will round off an upbeat third-quarter earnings season, which helped push Wall Street to new highs.
Retail sales data for October is also due on Tuesday, and is expected to reveal signs of any impact inflation has had on consumer spending.
Boeing Co, up 5.49%, was the top boost to the Dow Jones Industrials as the stock closed at a three-month high after Emirates airline announced an order for two 777 Freighters and as Saudi Arabian Airlines was in talks with the planemaker for a wide-body jet order.
The Dubai Airshow event is the first major aerospace conference since the pandemic decimated passenger air travel, with investors watching to see how the industry is coping with new dynamics.
Electric-car maker Tesla Inc fell 1.94% after Chief Executive Elon Musk engaged in a dispute with Bernie Sanders as the U.S. senator demanded the wealthy pay their “fair share” of taxes.
Tesla’s declines follow a steep drop of 15.4% last week after Musk offloaded a combined $6.9 billion worth of shares in the company.
The S&P materials sector, down 0.46%, was among the worst-performing sectors for the session on signs of weakness in China’s property sector, a key driver of global metal demand, which weighed on miners.
Dollar Tree Inc jumped 14.28% and was the top percentage gainer on the S&P 500 after activist investor Mantle Ridge LP revealed a 5.7% stake in the discount retailer.
Declining issues outnumbered advancing ones on the NYSE by a 1.22-to-1 ratio; on Nasdaq, a 1.26-to-1 ratio favored decliners. The S&P 500 posted 50 new 52-week highs and 3 new lows; the Nasdaq Composite recorded 129 new highs and 127 new lows. Volume on U.S. exchanges was 9.56 billion shares, compared with the 10.96 billion average for the full session over the last 20 trading days.
Read more:
Monday’s small-cap stocks to watch
Market movers: Stocks that saw action on Monday - and why
Reuters, Globe staff
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