Canada’s main stock index fell on Monday, dragged down by material-linked companies tracking lower metal prices, while investors scaled back hopes of an early rate cut by the Federal Reserve following Chair Jerome Powell’s recent comments.
At 11:10 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was down 221.35 points, or 1.05%, at 20,863.74
Materials stocks led declines, falling 1.9% after gold prices dropped to over-a-week low on a higher dollar and bond yields, while Chinese demand concerns weighed on copper prices.
Utilities stocks fell 1.8%. The sector was pulled down by Innergex Renewable Energy that slipped 5.2%.
In an interview on Sunday, Fed Chairman Jerome Powell said that the U.S. central bank can be “prudent” in weighing rate cuts, with a strong economy allowing central bankers time to build confidence inflation will continue falling.
“I don’t think there was too much of a surprise. March rate cut is pretty much off the table and people should reset,” said Allan Small, senior investment advisor of the Allan Small Financial Group with iA Private Wealth.
“There are expectations of a rate cut, mid-year at the earliest unless the economy in the U.S. and, for that matter, the economy in Canada really starts to falter,” Small said.
Investors will also look forward to key domestic employment data due on Friday to gauge the timing of the Bank of Canada’s rate cuts.
Separately, Canadian service sector activity slowed for an eighth straight month in January as new business ebbed and cost pressures intensified, but the pace of decline eased from December, S&P Global Canada services PMI data showed on Monday.
Amongst individual stocks, Brookfield Asset Management lost 1% after the company said it had raised $10 billion in the first closing of its second “Brookfield Global Transition Fund (BGTF II).”
Wall Street’s main indexes fell on Monday, as Treasury yields rose after Fed Chair Jerome Powell pushed back firmly against market speculations of imminent rate cuts, while investors assessed earnings from corporate America.
In an interview aired on Sunday, Powell said more evidence on a sustainable downtrend in inflation was needed to warrant lower rates, while Minneapolis Fed President Neel Kashkari wrote in an essay published on Monday that a resilient economy could defer rate cuts for some time.
Fresh data from the Institute for Supply Management showed the
U.S. services sector’s growth picked up in January, with a measure of input prices rising to an 11-month high.
While Friday’s data signaled the labor market’s resilience in the face of tight credit conditions, uncertainty over when borrowing costs might be lowered prevailed.
U.S. Treasury yields were on the rise, with the two-year yield jumping to a one-month high of 4.48%.
“Investors are concerned that while the economy is good and we’re not headed for recession, it is too strong and so the Fed might cut rates later and have fewer cuts in all,” said Sam Stovall, chief investment strategist at CFRA Research.
Traders expect a 67% chance of an at least 25-basis-point rate cut in May and a near-94% chance in June, according to the CME FedWatch Tool.
Investors also took a breather after Wall Street’s recent bull-market run that saw the benchmark S&P 500 and the blue-chip Dow ending at record high levels on Friday, boosted by Meta Platforms and Amazon.com’s solid results.
Results are now in from nearly half of the S&P 500 firms and fourth-quarter earnings estimates are improving sharply, with about 80% of the reports so far beating expectations, according to LSEG data on Friday.
Caterpillar jumped 1.2% after a higher quarterly profit, while Estee Lauder surged 14.6% as the MAC lipstick maker aims to cut about 3% to 5% of its workforce.
The Dow Jones Industrial Average was down 255.47 points, or 0.66%, at 38,398.95, the S&P 500 was down 20.21 points, or 0.41%, at 4,938.40, and the Nasdaq Composite was down 69.85 points, or 0.45%, at 15,559.10.
The S&P 500 materials sector was the worst hit, down 2.6%, dragged down by a 15.3% decline in Air Products after the industrial gas manufacturer forecast 2024 profit below estimates.
Boeing dropped 2.1% after saying a new quality glitch in some 737 MAX planes would delay some deliveries.
Tesla lost 3.4% after Piper Sandler slashed the stock’s price target and on a report German software company SAP will no longer source its company cars from the EV maker.
Nvidia jumped 4% to a record high following a price-target raise by Goldman Sachs.
Catalent soared 10.0% to an all-time high on Novo Nordisk parent Novo Holdings’ plans to buy the contract drugmaker in an $11.5-billion all-cash deal.
Declining issues outnumbered advancers for a 6.62-to-1 ratio on the NYSE and a 3.48-to-1 ratio on the Nasdaq.
The S&P index recorded 19 new 52-week highs and nine new lows, while the Nasdaq recorded 30 new highs and 98 new lows.
Reuters
