TORONTO — Canada's main stock index was down 180 points Tuesday, led by declines in the energy and base metal sectors, while U.S. stock markets also moved lower.
Weakness in energy and materials drove losses on both sides of the border, but weighed more on the TSX, said Ian Chong, associate portfolio manager for First Avenue Investment Counsel Inc.
Oil was lower amid ongoing concerns about China’s economy, said Chong.
China lowered its key lending rates as the world’s second-largest economy continues to stumble in its post-pandemic recovery.
“There's concerns that the economy's health is on shaky grounds, which is why they need to stimulate the economy and, you know, China is the largest importer of oil in the world, so clearly that has negative implications for the price,” said Chong.
The S&P/TSX composite index was down 180.07 points at 19,754.14.
In New York, where markets were closed Monday for the Juneteenth federal holiday, the Dow Jones industrial average was down 245.25 points at 34,053.87. The S&P 500 index was down 20.88 points at 4,388.71, while the Nasdaq composite was down 22.28 points at 13,667.29.
Investors are waiting cautiously for Federal Reserve chairman Jerome Powell’s twice-yearly report to Congress this week, said Chong.
“Markets could see some more volatility, because we can expect some colour as to why Powell opted to pause this month,” said Chong.
“I think he's going to be more hawkish than dovish,” he added.
“I don’t think he wants to stoke more fire in the equity markets.”
While markets have posted strong gains year to date, it’s been a narrow rally, said Chong, and while it’s broadened somewhat, it still sets a questionable foundation for the market to stand on as the back half of the year approaches.
“Is this rally really sustainable, especially heading into Q2 earnings season in late July and August?” he said.
“Q2 earnings is going to tell you a lot because you’re not only just getting the quarter, but you’re also getting the outlook from a lot of these companies heading into Q3.”
In Canada, Wednesday will see the latest retail sales giving some more insight into how the consumer is faring amid higher interest rates. Sales in March were down 1.4 per cent.
The Canadian dollar traded for 75.52 cents US compared with 75.72 cents US on Monday.
The August crude contract was down 74 cents from Friday at US$71.19 per barrel and the July natural gas contract was down 14 cents from Friday at US$2.49 per mmBTU.
The August gold contract was down US$23.50 from Friday at US$1,947.70 an ounceand the July copper contract was down a less than a penny from Friday at US$3.88 a pound.
— With files from The Associated Press
This report by The Canadian Press was first published June 20, 2023.
Companies in this story: (TSX:GSPTSE, TSX:CADUSD=X)
Rosa Saba, The Canadian Press
