Canada’s main stock index fell on Wednesday morning as energy shares lost their footing on weaker oil prices and the Bank of Canada signaled a rate hike might now come earlier next year than previously expected.
At 10:42 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was down 163.73 points, or 0.76%, at 21,009.72 after opening at 21,163.29.
The Bank of Canada held its key overnight interest rate at 0.25% as expected on Wednesday and said it was ending its quantitative easing program.
The central bank, which slashed interest rates to a record low 0.25% in March of last year in the first wave of the pandemic, said it was ending the QE program “in light of the progress made in the economic recovery”.
It will continue to buy only enough Government of Canada bonds to replace those that are maturing. It had previously said it would end QE before hiking rates.
The Bank of Canada, which is committed to holding rates at record lows until slack is absorbed, said it now expects that to happen “sometime in the middle quarters of 2022.” The previous estimate was for the second half of 2022.
In Toronto, the energy sector fell 1.5%, extending losses for the second session, as oil prices fell after industry data showed U.S. crude stockpiles rose more than expected.
Adding to losses was the materials sector, which includes precious and base metals miners and fertilizer companies, falling 0.8%.
The tech sector was down 1.6%, while consumer discretionary and staples slid 1.1% each.
After snapping a seven-month winning streak in September, the Canadian equity index has gained 6% so far this month, on course for its best monthly performance since November 2020.
The Nasdaq led gains among Wall Street indexes on Wednesday after a robust forecast from Microsoft supported optimism about the third-quarter earnings season, while a decline in oil prices hurt shares of energy companies.
The S&P 500 index and the Dow Jones Industrial Average struggled for direction in the first hour of trading, with seven of the 11 major S&P 500 sectoral indexes falling.
Microsoft Corp jumped 3.6% after it forecast a strong end to the calendar year, helped by its booming cloud business. Google-owner Alphabet Inc gained 3.3% after reporting a record quarterly profit on a surge in ad sales.
Their shares, coupled with other mega-cap growth names Amazon.com, and Tesla Inc, provided the biggest boost to the Nasdaq index.
“Today feels exactly like the calm before the storm ahead of a pile of earnings that is due tomorrow and everyone wants to know how the supply-chain issues are going to work out,” said Dennis Dick, a trader at Bright Trading LLC.
Worries over rising prices, potentially higher corporate taxes and the Federal Reserve’s tapering plans had rattled markets last month, but upbeat earnings reports have reinforced sentiment in October, helping drive the S&P 500 and the Dow to all-time highs this week.
As of Tuesday, profits for S&P 500 companies are expected to grow 35.6% year-on-year in the third quarter. Out of the 144 Of companies that have reported earnings, 81.9% reported above analyst expectations, according to Refinitiv IBES data.
Energy and materials led S&P 500 sectoral declines, tracking lower commodity prices.
Major lenders such as Bank of America Corp and JPMorgan slipped on a flattening U.S. yield curve .
The Dow Jones Industrial Average was down 33.66 points, or 0.09%, at 35,723.22, the S&P 500 was up 1.19 points, or 0.03%, at 4,575.98, and the Nasdaq Composite was up 59.99 points, or 0.39%, at 15,295.70.
Shares of McDonald’s Corp rose 1.9% after the fast-food company reported upbeat quarterly same store sales, while Coca-Cola Co added 2.1% after the beverage maker raised its full-year profit forecast.
Visa Inc slipped 4.4% as its ‘conservative’ 2022 forecast clouded better-than expected fourth quarter earnings.
Top Senate Democrat Ron Wyden proposed a so-called billionaires tax that would require U.S. billionaires to pay tax on unrealized gains from their assets.
“Taxing unrealized gains is a spooky thing. We have a government that is not scared to tax and that effectively affects investor sentiment,” said Dick.
Texas Instruments Inc fell 6.0% after it forecast tepid quarterly revenue as the chipmaker struggles with supply chain constraints in the semiconductor industry.
Robinhood Markets Inc tumbled 9.7% after the retail broker reported downbeat third-quarter revenue as trading levels declined for cryptocurrencies including dogecoin.
Reuters
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