Canada’s main stock index fell 1% on Friday as a jump in the U.S. dollar following the release of stronger-than-expected U.S. jobs data pressured metal mining stocks, while investors braced for increased volatility in the months ahead. Wall Street stocks ended slightly lower.
The Toronto Stock Exchange’s S&P/TSX composite index ended down 222.10 points at 22,007.00. For the week, the index lost 1.2%, its third consecutive weekly decline.
The materials group was down 4.2% as the price of gold fell 3.7% and copper hit a one-month low.
“Gold is sensitive to the U.S. dollar and real interest rates,” said Joseph Abramson, co-chief investment officer at Northland Wealth Management.
The U.S. dollar and bond yields climbed after data showed the U.S. economy created 272,000 jobs in May, suggesting that the Federal Reserve could take time in starting its easing cycle.
The Toronto market has gained 5% this year, while the S&P 500, in the United States, has posted even larger gains.
“After big gains, we’re taking some profit because we expect risk aversion to increase until the U.S. election,” Abramson said.
Canada’s monthly employment report was also released. It showed the unemployment rate increasing to 6.2% in May and faster wage growth, providing mixed signals for the Bank of Canada.
On Wednesday, the BoC became the first G7 central bank to lower borrowing costs.
Energy also lost ground, falling 0.9%, as the price of oil gave back its earlier gains to settle 2 cents lower at $73.53 a barrel.
Real estate and utilities, two sectors particularly sensitive to bond yields, were down 1.6% and 1% respectively.
The U.S. economy generated about 272,000 jobs in May, far more than the 185,000 analysts had forecast, according to a Labor Department report. The unemployment rate inched up to 4%.
The benchmark S&P 500 slipped immediately after the report while U.S Treasury yields climbed as traders slashed bets on a September rate reduction. The index recovered and briefly hit a fresh intraday record high as investors noted the data pointed to underlying economic health.
It finished slightly lower, with the utilities, materials, and communication services stocks among the biggest drag. Financials and technology advanced ahead of others.
For the week, the S&P 500 gained 1.32%, Nasdaq rose 2.38%, and the Dow added 0.29%.
“This tells you there’s certainly not going to a cut in the short term, and with the bond yields going back up it’s putting a lot of pressure on the risk-on trade, which is probably small caps,” said Sandy Villere, portfolio manager at Villere & Co in New Orleans.
“It’s just a function of interest rates and maybe a little higher for longer, and people have to recalibrate for that type of environment,” he added.
Traders now see a 56% chance of a September rate reduction, according to the CME’s FedWatch tool. Investors will eye U.S. inflation data next week and the Federal Reserve’s two-day policy meeting, which ends on June 12.
“No one expects the Fed to cut (rates next week), but will they open the door for a cut as soon as September is the big question on everyone’s mind,” said Ryan Detrick, chief market strategist at the Carson Group, adding he still sees a September reduction on the table.
The Dow Jones Industrial Average fell 87.18 points, or 0.22%, to 38,798.99, the S&P 500 lost 5.97 points, or 0.11%, to 5,346.99 and the Nasdaq Composite lost 39.99 points, or 0.23%, to 17,133.13.
GameStop slumped 39% in volatile trading just as stock influencer “Roaring Kitty” kicked off his first livestream in three years. The gaming retailer had announced a potential stock offering and a drop in quarterly sales.
Other so-called meme stocks, including AMC Entertainment and Koss Corp, fell 15.1% and 17.4%, respectively.
Nvidia slipped, on track to extend the previous session’s losses, with its valuation again dipping below the $3 trillion mark.
Lyft shares rose 0.6%, following a forecast of 15% annual growth in its gross bookings through 2027 after markets closed on Thursday.
Declining issues outnumbered advancers by a 2.72-to-1 ratio on the NYSE. On the Nasdaq, 1,177 stocks rose and 3,064 fell as declining issues outnumbered advancers by a 2.6-to-1 ratio.
The S&P 500 posted 17 new 52-week highs and 5 new lows while the Nasdaq Composite recorded 34 new highs and 149 new lows.
Total volume of shares traded across U.S. exchanges was about 10.75 billion, compared with the 12.7 billion average over the last 20 trading days.
Reuters, Globe staff
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