Canada’s main stock index edged lower on Wednesday to its lowest closing level in nearly three weeks as a drop in oil prices weighed on energy shares and the Bank of Canada raised interest rates to the highest level in almost 15 years.
The S&P/TSX composite index ended down 16.95 points, or 0.1%, at 19,973.22, its fourth straight day of declines and its lowest closing level since Nov. 17.
U.S. benchmark S&P 500 also dipped as investors weighed potential recession fears linked to the pace of the Federal Reserve’s monetary policy tightening.
The Bank of Canada hiked its key policy rate by half a percentage point to 4.25%, the highest level since January 2008, but the market impact was limited by a signal its unprecedented tightening campaign was near an end.
The energy sector fell 0.6% as the price of oil settled down 3% at $72.01 a barrel, its lowest level of the year, driven by a report showing bigger-than-expected increases in U.S. fuel stocks.
“This report shows the economy is clearly weakening and does not give energy bulls any reasons to buy into this weakness,” Edward Moya, senior market analyst at OANDA in New York, said in a note.
Heavily-weighted financials dipped 0.4% and technology ended 0.5% lower.
Helping to cap declines for the TSX were gains for the consumer discretionary and consumer staples sectors, up 1.2% and 0.7% respectively.
The materials group, which includes precious and base metals miners and fertilizer companies, added 0.8% as gold and copper prices rose.
On Wall Street, it was the S&P 500′s fifth straight day of losses, while the Nasdaq finished down for the fourth time in a row. The Dow snapped a two-session losing streak, as it ended unchanged from the previous day.
The Nasdaq was dragged down by a 1.4% drop in Apple Inc on Morgan Stanley’s iPhone shipment target cut and a 3.2% fall in Tesla Inc over production loss worries.
Markets have also been rattled by downbeat comments from top executives at Goldman Sachs Group Inc, JPMorgan Chase & Co and Bank of America Corp on Tuesday that a mild to more pronounced recession was likely ahead.
Fears that the U.S. central bank might stick to a longer rate-hike cycle have intensified recently in the wake of strong jobs and service-sector reports.
More economic data, including weekly jobless claims, producer price index and the University of Michigan’s consumer sentiment survey this week, will be on the watch list for clues on what to expect from the Fed on Dec. 14.
“It feels like we’re in this very uncertain period where investors are trying to ascertain what’s more important, as policymakers are slowing down on rates but the data is not playing ball,” said Craig Erlam, senior market analyst at OANDA.
“The market is trying to balance the headwinds and the tailwinds and this is causing some confusion.”
The CBOE volatility index, also known as Wall Street’s fear gauge, closed at 22.68, its highest finish since Nov. 18.
Money market participants see a 91% chance that the Fed will increase its key benchmark rate by 50 basis points in December to 4.25%-4.50%, with rates peaking in May 2023 at 4.93%.
The S&P 500 lost 7.34 points, or 0.19%, to close at 3,933.92 and the Nasdaq Composite dropped 56.34 points, or 0.51%, to finish at 10,958.55. The Dow Jones Industrial Average was flat, ending on 33,597.92.
Three of the 11 major S&P sector indexes were higher, with healthcare one of them. Technology and communication services, down 0.5 and 0.9% respectively, were the worst performers.
Carvana Co had its worst day as a public company, losing nearly half its stock value, after Wedbush downgraded the used-car retailer’s stock to “underperform” from “neutral” and slashed its price target to $1.
Meanwhile, United Airlines traded 4.1% lower. Unions representing various workers at the airline said they would join forces on contract negotiations.
Travel-related stocks were generally down. Delta Air Lines and American Airlines Group were 4.4% and 5.4% lower respectively, with cruise line operators Carnival Corp and Norwegian Cruise Line Holdings and accommodation-linked Airbnb Inc and Booking Holdings all falling between 1.7% and 4.4%.
Volume on U.S. exchanges was 10.29 billion shares, compared with the 10.98 billion average for the full session over the last 20 trading days. The S&P 500 posted seven new 52-week highs and seven new lows; the Nasdaq Composite recorded 61 new highs and 307 new lows.
Reuters, Globe staff
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