U.S. and Canadian stocks ended decisively lower on Friday as concerns grew about a global rise in coronavirus cases tied to the highly contagious Delta variant.
Canada’s benchmark stock index lost nearly 1% and the Dow was down almost 300 points. Both the TSX energy and materials sectors had a rough session, declining by more than 3%, even though moves in underlining commodities were much more modest. Oil was virtually unchanged.
“COVID is starting to affect the market, ironically, for the first time since last summer, when the reopening trade began,” said Jake Dollarhide, chief executive officer of Longbow Asset Management in Tulsa, Oklahoma.
On Thursday, Los Angeles County said it would reimpose its mask mandate this weekend. On Friday, public health officials said U.S. coronavirus cases were up 70% over the previous week, with deaths up 26%.
England’s coronavirus crisis could return again surprisingly quickly, the British government’s chief medical adviser said, before lifting all pandemic-led restrictions on Monday despite rising COVID-19 cases.
In Toronto, TSX copper miners were particularly hard hit, far outpacing a 0.4% drop in the copper futures price Friday.
Turquoise Hill Resources fell 15.64% and First Quantum Minerals nearly 10%. Stelco Holdings, a stock that had been climbing steadily for much of the week, was down 6.52%.
Neptune Wellness Solutions was a top decliner in Canada, plummeting 22.22% after an analyst downgraded the consumer products health and wellness company following a disappointing fiscal fourth quarter.
The S&P/TSX Composite Index Friday lost 198.18 points, or 19,985.54. For the week, it fell 0.37%.
The slide on Wall Street is surprising given earnings from the companies that have reported second-quarter results so far have surpassed estimates by 22.1%, Credit Suisse said in a note.
Removing year-ago comparisons show earnings are up decently from levels two years earlier and inflation is likely running about 2.6%, once last year’s low baseline is removed, said Jason Pride, chief investment office for private wealth at Glenmede in Philadelphia.
“That should ultimately be acceptable to the (equity) market and permit an ongoing upward grind,” Pride said. “My one hesitation is equity market valuations are high.”
Economically sensitive industrials, energy, financials, consumer discretionary and materials are projected to more than double earnings, while so-called big tech and non-cyclicals are expected to grow 36% and 10%, respectively, Credit Suisse said.
The Dow Jones Industrial Average closed down 0.86%, the S&P 500 slid 0.75%, and the Nasdaq Composite lost 0.80%.
For the week, the Dow lost 0.53%, the S&P 500 fell 0.97% and the Nasdaq shed 1.87%. The S&P 500 real estate index rose to a record high on Friday.
Gold prices dipped as a stronger dollar dulled bullion’s appeal, while bond yields were subdued after Fed Chair Jerome Powell this week pledged “powerful support” to ensure the U.S. economic recovery does not falter.
Mark Haefele, chief investment officer at UBS Global Wealth Management, adviser to many of the world’s super-rich, said he expected rates to move higher as the recovery fully takes hold.
“We believe the downward trend in yields will reverse as confidence in the economic recovery mounts. However, we see a rebound in 10-year yields to 2% by year-end as consistent with a continued rally in equities.”
With files from Reuters
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