Skip to main content

Canada’s main stock index fell into correction territory on Wednesday as investor worries about the outlook for inflation offset higher commodity prices.

The S&P/TSX composite index ended down 52.81 points, or 0.3%, at 19,837.25, its lowest closing level since July 2021.

It took the TSX’s losses since the March 29 closing record high to 10.2%. A correction is confirmed when an index closes 10% or more below its record closing level.

U.S. stocks have been faring even worse this year, including on Wednesday, when the Nasdaq dropped more than 3% and the Dow fell for a fifth straight day after U.S. inflation data did little to ease investor worries over the outlook for interest rates and the economy.

The benchmark S&P 500 lost 1.7% and is now down 18% from its Jan. 3 record closing high.

The Labor Department’s monthly consumer price index (CPI) report suggested inflation may have peaked in April but is likely to stay strong enough to keep the Federal Reserve’s foot on the brakes to cool demand.

The CPI increased 0.3% last month, the smallest gain since last August, while economists polled by Reuters had forecast consumer prices gaining 0.2% in April.

“It did not dispel the notion that there’s more to go in terms of reining in inflation,” said Quincy Krosby, chief equity strategist at LPL Financial in Charlotte, North Carolina.

“The market is trying to make sense of whether we’re also going to see growth pullback more than expected” as the Fed raises rates, she said.

The U.S. inflation report sets the backdrop for Canadian consumer price data next Wednesday.

“Canadian and U.S. economies are closely linked. Therefore, I think you can expect the market to use the U.S. release as a pointer for the Canadian figure next week,” said Stuart Cole, head macroeconomist at Equiti Capital.

Money markets expect the Bank of Canada to hike by half a percentage point for a second straight policy meeting on June 1 to help cool price pressures.

The Toronto market’s consumer discretionary sector fell 2.5% on Wednesday, while information technology ended 1.6% lower.

Higher interest rates reduce the value to investors of the future cash flows that technology and other high-growth sectors are expected to produce.

In contrast, the energy sector rallied 1.5%, helped by a rebound in crude oil as flows of Russian gas to Europe fell. U.S. crude oil futures settled nearly 6% higher at $105.71 a barrel.

Shares of Endeavour Silver Corp rose 7.7% after the company reported upbeat first-quarter results. That helped the materials group, which includes precious and base metals miners and fertilizer companies, to post a modest gain, advancing 0.3%.

Gold was up 0.8% at about $1,853 per ounce.

On Wall Street, Apple shares dropped 5.2% and were the biggest weight on the Nasdaq and S&P 500 indexes.

“There is much focus right now on Apple,” Krosby said. “Given its weighting, Apple is the bellwether for the market from many perspectives.”

Investor concerns about whether the Fed will continue to hike interest rates aggressively have hit growth stocks especially hard. The consumer discretionary and technology sectors fell about 3% each, leading S&P 500 sector declines.

The Dow Jones Industrial Average fell 326.63 points, or 1.02%, to 31,834.11, the S&P 500 lost 65.87 points, or 1.65%, to 3,935.18 and the Nasdaq Composite dropped 373.44 points, or 3.18%, to 11,364.24.

The Dow’s five-day decline was its longest losing streak since mid-February.

Energy shares ended higher and helped to limit some of the declines in the S&P 500 and Dow. Exxon Mobil Corp shares were up 2.1%.

Value outperformed growth shares in general. The S&P growth index was down 2.8% on the day versus a 0.5% decline in the S&P value index.

Investors are anxious to see more data on inflation Thursday, when U.S. producer price index data is due.

Stocks have fallen this year following the rate concerns, as well as the Ukraine war and the latest coronavirus lockdowns in China.

Coinbase Global Inc slid 26.4% after its first-quarter revenue missed estimates amid turmoil in global markets that has curbed investor appetite for risk assets.

Volume on U.S. exchanges was 15.38 billion shares, compared with the 12.75 billion average for the full session over the last 20 trading days. Declining issues outnumbered advancing ones on the NYSE by a 2.16-to-1 ratio; on Nasdaq, a 3.70-to-1 ratio favored decliners. The S&P 500 posted 1 new 52-week highs and 67 new lows; the Nasdaq Composite recorded 10 new highs and 1,221 new lows.

In early trade Wednesday, benchmark 10-year Treasury yields had fallen to their lowest levels in a week. But after the inflation data, yields marched back up toward the three-year high of 3.203% hit on Monday before falling again.

By late afternoon, benchmark 10-year notes were yielding 2.9148%, from 2.993% late on Monday.

Reuters, Globe staff

Be smart with your money. Get the latest investing insights delivered right to your inbox three times a week, with the Globe Investor newsletter. Sign up today.