The S&P 500 and S&P/TSX Composite Index finished slightly lower in choppy trading on Wednesday following labour market data and comments from a Federal Reserve official that bolstered the case for an interest rate cut in the U.S.
Government bond yields fell, particularly in the U.S., which helped to bolster the utilities sector and other interest rate sensitives on both sides of the border.
Labor Department data showed that U.S. job openings fell to a 3-1/2-year low in July, indicating continued easing of labour market tightness that could strengthen the Fed’s hand to begin cutting rates at its next meeting later this month.
Raphael Bostic, Atlanta Fed president, said on Wednesday the central bank must not keep interest rates too high much longer or it risks causing too much harm to employment. He added that waiting until inflation falls back to the Fed’s 2% goal before cutting rates “would risk labor market disruptions that could inflict unnecessary pain and suffering.”
In the previous day’s session, all three Wall Street indexes as well as Canada’s TSX slumped to their biggest one-day loss since early August as investors dumped technology-related stocks in a dour start to September - which is historically the worst month for equities.
“This is always a rocky period in September but the economy is holding up,” said Bill Strazzullo, chief markets strategist at Bell Curve Trading in Boston. “The consumer is fine, the labour market is fine. I’m still bullish overall.”
Shares of Nvidia, which suffered a massive US$279 billion drop in market value on Tuesday, closed 1.7% lower. Shortly before the close of trading, the company denied a media report that it received a subpoena from the U.S. Department of Justice.
Other megacap growth stocks fell, including Apple which ended 0.9% lower. Microsoft dipped 0.1%, Alphabet dropped 0.5% and Amazon.com slipped 1.7%. Tesla shares rose 4.2%.
The S&P/TSX composite index ended down 1.69 points, or 0.01%, at 23,040.76.
The Bank of Canada lowered its key interest rate by 25 basis points to 4.25% as expected on Wednesday and Governor Tiff Macklem, citing weak growth, said a larger cut could be in order if the economy needs a boost.
While there was little reaction in bond and credit markets to the decision, treasury yields were lower following the U.S. labour data. By late day, the U.S. two-year yield was down about 12 basis points and the equivalent Canadian yield about 6 basis points.
Traders increased bets on a larger 50 basis points Fed cut after Wednesday’s jobs openings report. They are now pricing in a 43% chance of a 50 basis point rate reduction, up from 39% before the data, and a 57% chance of a 25 basis points cut, CME Group’s FedWatch Tool showed.
“The big event of the week comes in the form of Friday’s payrolls print,” said Ian Lyngen, head of U.S. rates strategy at BMO Capital Markets in New York. “That’s to a large extent going to give us the road map for what to expect from the Fed. The employment data is now overshadowing inflation as the biggest risk to near-term policy expectations.”
In Toronto trading, the real estate sector advanced 1.3%, utilities rose 0.7% and communication services ended 0.8% higher.
The energy sector fell 1.8% as lackluster data from the United States and China raised expectations of reduced demand for oil. U.S. crude oil futures settled 1.6% lower at US$69.20 a barrel.
The materials group, which includes metal miners and fertilizer companies, also lost ground, falling 0.6%.
On Wall Street, utilities and consumer staples stocks led the gainers while energy and technology equities were the main drag. Six out of 11 S&P 500 sectors ended lower.
The Dow Jones Industrial Average rose 38.04 points, or 0.09%, to 40,974.97, the S&P 500 lost 8.86 points, or 0.16%, to 5,520.07 and the Nasdaq Composite lost 52.00 points, or 0.30%, to 17,084.30.
The Philadelphia SE Semiconductor index rebounded from its biggest one-day drop since the COVID-19 pandemic in the previous session and ended up 0.25%.
Advanced Micro Devices rose nearly 3% after it named former Nvidia executive Keith Strier as senior vice president of global AI markets.
Zscaler fell nearly 19% after the company forecast fiscal 2025 revenue and profit below estimates. Dollar Tree slumped 22% after the discount store operator trimmed its annual sales and profit forecasts.
Total volume across U.S. exchanges was about 10.5 billion shares, down from a 20-day moving average of nearly 11 billion shares.
Reuters, Globe staff