The TSX and S&P 500 closed lower on Tuesday while the Nasdaq edged up to a record high, as investors balanced worries about the slowing pace of economic recovery with expectations that the Federal Reserve will maintain its accommodative monetary policy.
The Canadian benchmark hit an intraday record high early in the session before drifting lower, as commodity prices lost ground amid a rallying U.S. dollar. The S&P/TSX Composite Index closed down 14.80 points, or 0.07%, at 20,806.63. Tech and financials rose modestly, but most other major sectors ended lower for the day, including a 0.65% drop in energy stocks and a 0.56% decline in materials.
U.S. West Texas Intermediate crude settled down 94 cents or 1.4% from Friday’s close at $67.35 a barrel, and touched a session low of $67.64. U.S. gold futures settled 1.9% lower at $1,798.5 an ounce. The declines were largely in reaction to the greenback jumping 0.5% against its rivals, making gold and other commodities more expensive for holders of other currencies.
Uranium stocks were among the biggest gainers on the TSX, with Cameco and Denison Mines both rallying more than 7% Tuesday. Spot prices for uranium have surged about 15% over the last couple of weeks, with some analysts pointing to the recent creation of the Sprott Physical Uranium Trust - an entity designed to provide investors with direct exposure to the uranium price - as contributing to the rally.
On Tuesday, Morgan Stanley cut its rating on U.S. stocks to underweight, pointing to risks related to economic growth, policy and legislation, and warning it expects the next two months to be “bumpy.”
Accommodative central bank policies and reopening optimism have pushed the S&P 500 and Nasdaq to record highs over the past few weeks, but concerns are growing about rising coronavirus infections due to the Delta variant and its impact on the economic recovery.
Analysts on average expect S&P 500 companies to increase their earnings per share by 30% in the September quarter, following a 96% surge in the second quarter, according to I/B/E/S data from Refinitiv.
The Nasdaq was supported by Big Tech stocks that have fueled Wall Street’s gains in recent years. Apple rose 1.6% and Netflix added 2.7%, both hitting record highs.
“You could call it a gravitation toward Big Tech. As people feel a bit uncertain about how COVID will play out, you don’t have your reopening worries with those companies,” said Tom Martin, senior portfolio manager at Globalt Investments in Atlanta.
Much of the rest of Wall Street fell. Eight of the eleven sub-indexes traded lower, with economy-sensitive sectors like industrials down 1.8% and utilities dipping 1.4%. The real estate index lost 1.1%.
Tepid August payrolls data on Friday last week raised concerns that the economic recovery was slowing down.
Unofficially, the Dow Jones Industrial Average fell 0.76% to end at 35,100 points, while the S&P 500 lost 0.34% to 4,520.03.
The Nasdaq Composite climbed 0.07% to 15,374.33.
The S&P 500 remains up about 20% year to date, and the Nasdaq is up about 19%.
Amgen Inc fell 2.1% and Merck & Co lost 1.6% after Morgan Stanley cut its rating on the stocks to “equal-weight” from “overweight.”
Boeing Co dropped 1.8% after Ireland’s Ryanair said it had ended talks with the planemaker over a purchase of 737 MAX 10 jets worth tens of billions of dollars due to differences over price.
Match Group Inc jumped over 7% after the S&P Dow Jones Indices said on Friday the Tinder parent will join the benchmark index.
Columbia Property Trust Inc surged 15% after Pacific Investment Management Company said it would buy the company for $2.2 billion.
Volume on U.S. exchanges was 9.2 billion shares, compared with the 9.0 billion average for the full session over the last 20 trading days. Declining issues outnumbered advancing ones on the NYSE by a 2.27-to-1 ratio; on Nasdaq, a 1.65-to-1 ratio favored decliners. The S&P 500 posted 19 new 52-week highs and 1 new lows; the Nasdaq Composite recorded 120 new highs and 24 new lows.
The Canadian dollar traded for 79.23 cents US compared with 79.88 cents US on Friday.
Reuters, with files from Darcy Keith of The Globe and Mail
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