Canadian and U.S. stocks ended lower on Monday as investors took profits after a sharp rally in recent weeks that led to the S&P 500 benchmark index’s best November ever.
Most of the major S&P 500 and S&P/TSX Composite sectors fell, with the energy indexes leading losses, tracking a drop in crude prices.
The S&P 500 and TSX technology indexes rose, thanks to a rise in Apple Inc shares in the U.S. and Shopify in Canada. Shares in the Canadian tech giant rose 4%.
Month-end rebalancing of portfolios played into Monday’s weakness, analysts said, as investors cashed in on gains after a strong month marked by updates of COVID-19 vaccines making headway and hopes of a swift economic rebound next year.
A rotation into energy, industrials and financials, all expected by many investors to outperform as the economy recovers from its downturn, have driven gains of more than 10% for the S&P 500 in November and helped the Dow Jones Industrial Average make its biggest monthly gain since 1987.
“I would attribute (Monday’s drop) to compounding concerns over the coronavirus, combined with the market just looking to digest some of the recent gains over the past month,” said CFRA Chief Investment Strategist Sam Stovall.
“When you sprint and get out of breath, you have to slow down to catch your breath.”
After an explosion in infections and business restrictions this month that stalled the U.S. labor market recovery, the focus has shifted to Tuesday’s address by Fed Chair Jerome Powell before the Senate Banking Committee, the Fed’s Beige Book on Wednesday and the monthly jobs report on Friday.
The S&P/TSX Composite Index fell 191.13 points, or 1.10%, to 17,205.43, with the energy sector losing 6.35%. Financials lost nearly 2% ahead of their quarterly results later this week. But cannabis stocks continued their post-U.S. election surge, with many among the biggest gainers in the Canadian market on Monday. Aurora Cannabis was up nearly 11%, Cronos Group 8.03%, and Aphria 7.59%.
Oil edged lower on Monday as the world’s major oil producers discussed extending deep output cuts at talks this week, but benchmark crude ended the month with a strong rally built on hopes that COVID-19 vaccines will soon be available.
Brent crude for January delivery, which expires on Monday, settled at $47.59 a barrel, dropping 59 cents, or 1.2%. The more actively traded February Brent contract was down 37 cents at $47.88. U.S. West Texas Intermediate crude for January delivery settled at $45.34 a barrel, down 19 cents, or 0.4%.
OPEC members reached a broad consensus on the need to extend existing oil production cuts for three months from January if their allies in the wider OPEC+ group also support such a move, ministers and delegates said. The Organization of the Petroleum Exporting Countries, Russia and others, known as OPEC+, plan to hold wider talks on Tuesday after discussions of key ministers on Sunday failed to reach a consensus.
Unofficially, the Dow Jones Industrial Average fell 265.91 points, or 0.89%, to 29,644.46, the S&P 500 lost 16.5 points, or 0.45%, to 3,621.85 and the Nasdaq Composite dropped 7.11 points, or 0.06%, to 12,198.74.
IHS Markit topped gains on the S&P 500 after data giant S&P Global agreed to buy the financial information provider in a $44 billion deal that would be the biggest corporate acquisition of 2020.
U.S. Health Secretary Alex Azar said on Monday the first two vaccines against the novel coronavirus could be available to Americans before Christmas.
Moderna Inc surged after it unveiled plans to apply for U.S. and European emergency authorization for its COVID-19 vaccine.
The February gold contract was down US$7.20 at US$1,780.90 an ounce and the March copper contract was up 2.05 cents at nearly US$3.44 a pound.
Read more: Stocks that saw action Monday - and why
Reuters, with files from Darcy Keith of The Globe and Mail
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