Canada’s resources-heavy main stock index was dragged down on Wednesday by a drop in mining shares as prices of precious metals declined while investors awaited minutes from the U.S. Federal Reserve’s latest meeting for cues on interest rate cuts.
At 10:08 a.m. ET, the S&P/TSX composite index was down 72.25 points, or 0.35%, at 20,799.89.
Wall Street was also weaker, but pared some declines after data showed lower-than-expected job openings in November, hinting at a softening labour market.
A scorching rally in global equities in the last two months of 2023 faltered at the start of the new year as investors pared back bets of early rate cuts from the Fed and escalating tensions in the Middle East sapped risk appetite.
“We continue to see a normalizing of U.S. labor markets. That further propels the central bank’s ability to cut rates,” said Art Hogan, chief market strategist at B Riley Wealth.
Minutes from the Fed’s December meeting due at 1400 ET will offer further clarity on the monetary policy path.
Meanwhile, traders are pricing in 43% odds of a rate cut of at least 25 basis points by the Bank of Canada in March.
The TSX materials sector, which includes precious and base metals miners and fertilizer companies, dropped 1.3% as a stronger dollar pushed gold and copper prices to a near two-week low.
The technology sector, which posted its biggest one-day percentage drop in more than three months on Tuesday, fell 0.7%. Healthcare fell over 1%.
Energy shares outperformed the broader market, gaining 1.4% as crude prices rose.
Suncor Energy climbed 4% after the energy firm said it saw record upstream production in the fourth quarter.
Orea Mining dropped 25% after the company announced expected delay in filing annual audited financial statements.
Wall Street kicked off the new year on a downbeat note, as Apple and high-growth companies came under pressure from higher bond yields.
Last week, the benchmark S&P 500 came within striking distance of its all-time closing high as investors priced in aggressive rate cuts this year following signs of cooling inflation.
Shares of rate-sensitive megacap stocks extended their drop on Wednesday, with Nvidia, Apple and Tesla down between 0.6% and 3.8%, as the 10-year Treasury yield climbed for a fourth straight session to 3.968%.
“The decline yesterday, today and maybe for the next couple of weeks, is a result of people locking in profits and reconsidering what the narrative is – are rates really going down five or six times as it appeared to be the narrative at the end of last year?” said Ken Polcari, managing partner at Kace Capital Advisors.
While the Fed is widely expected to keep rates on hold in January, traders have priced in a 65.7% chance of a 25 basis point rate cut in March, as per CMEGroup’s FedWatch tool.
“The minutes are going to show that they’ve been talking about potentially starting to cut rates, but not at the rate at which the market is expecting,” added Polcari.
The U.S. central bank is “making real progress” towards taming inflation and a soft landing seeming “increasingly conceivable,” said Richmond Fed President Thomas Barkin, a voting member in the FOMC’s rate-setting committee this year.
Another report Wednesday showed a gauge of U.S. manufacturing activity stood at 47.4 in December, above the estimate of 47.1, according to economists polled by Reuters.
At 10:08 a.m. ET, the Dow Jones Industrial Average was down 164.45 points, or 0.44%, at 37,550.59, the S&P 500 was down 22.00 points, or 0.46%, at 4,720.83, and the Nasdaq Composite was down 91.78 points, or 0.62%, at 14,674.16.
Nine of 11 S&P 500 sectors traded in the red, with materials and real-estate leading declines.
Verizon Communications rose 1.7% after KeyBanc upgraded the stock to “overweight.”
Charles Schwab and Blackstone dropped 2.8% and 3.8%, respectively, after Goldman Sachs downgraded the stocks to “neutral” from “buy.”
SentinelOne dropped 2.3% as the cybersecurity firm plans to acquire Indian cloud security firm PingSafe to expand its cloud capabilities in a cash-and-stock deal.
Declining issues outnumbered advancers for a 2.98-to-1 ratio on the NYSE and a 2.70-to-1 ratio on the Nasdaq.
The S&P index recorded 15 new 52-week highs and no new lows, while the Nasdaq recorded 27 new highs and 33 new lows.
Reuters, Globe staff
