Canada’s benchmark stock index Wednesday fell from the record high it set a day earlier, led by a steep selloff in the energy and materials sectors, amid a general risk-off day across global markets highlighted by an early plunge in cryptocurrency prices. It was a particularly harsh day of losses among TSX copper miners.
Wall Street’s main indexes closed lower as well after minutes from an April Federal Reserve meeting showed participants agreed the U.S. economy remained far from the central bank’s goals, with some considering discussions on tapering its bond buying program.
The S&P 500 added to losses after the release of the minutes revealed a number of Fed policymakers thought that if the economy continued rapid progress, it would become appropriate “at some point” in upcoming meetings to begin discussing a tapering of the Fed’s monthly purchases of government bonds, a policy designed to keep long-term interest rates low.
“There continues to be a view and a perspective from the participants, as well as the Fed staff, that these inflationary pressures that are beginning to become evident will remain transitory in their view and will likely recede as we transition into 2022,” said Bill Northey, senior investment director at U.S. Bank Wealth Management in Minneapolis.
Strong inflation readings and signs of a worker shortage in recent weeks have fueled fears and roiled stock markets despite reassurances from Fed officials that the rise in prices would be temporary.
The North American main indexes all hit their session lows in morning trade, after opening sharply lower at the open, then partially recovered before the release of the Fed minutes pressured them anew.
The S&P/TSX Composite Index closed down 90.02 points, or 0.46%, at 19,417.03. The index set record highs both other days this week, even as U.S. indexes lost ground amid a continued selloff in growth and technology stocks.
The TSX energy sector lost 3% on Wednesday, and materials 1.88%. Losses were otherwise generally mixed and minor in other major sectors in Canada, although technology got a notable boost thanks to a 3.92% rally in Shopify shares.
Losses in the materials sector was centered on copper producers, which have surged this year. Capstone Mining lost 11.37%, Teck Resources 9.77%, First Quantum Minerals 8.49%, and HudBay Minerals 6.28%.
Those losses were reflecting a selloff in the price of copper, as rising inflation worries pushed investors into a risk-off sentiment, offsetting the impact of potential supply disruptions in the top producing region of South America.
Benchmark three-month copper on the London Metal Exchange (LME) shed 3.2% to US$10,077 a tonne in afternoon trading. Last week, copper hit a record of $10,747.50 a tonne and has jumped 32% so far this year.
“A lot of good news has already been priced in to copper,” said Julius Baer analyst Carsten Menke, citing the muted impact of potential for higher royalties and strikes in top producer Chile and a socialist party leading polls in Peru, on prices.
News that China plans to strengthen management of both supply and demand sides to curb “unreasonable” increases in commodity prices and prevent the pass-through to consumers, also dragged metals lower.
Oil prices, meanwhile, dropped over US$2 a barrel on Wednesday to their lowest in three weeks, on worries that surging COVID-19 cases in Asia would dent demand for crude and that U.S. inflation fears could prompt the Federal Reserve to slow economic growth with interest rate hikes.
Traders also cited rumors that the Iran nuclear talks were making progress, which could boost global crude supplies and depress prices.
Brent futures fell $2.05, or 3.0%, to settle at $66.66 a barrel, while U.S. West Texas Intermediate (WTI) crude fell $2.13, or 3.3%, to settle at $63.36. Earlier in the day, WTI was down more than 5%. That was the lowest close for both benchmarks since April 27.
The Dow Jones Industrial Average fell 164.62 points, or 0.48%, to 33,896.04, the S&P 500 lost 12.15 points, or 0.29%, to 4,115.68 and the Nasdaq Composite dropped 3.90 points, or 0.03%, to 13,299.74.
Volume on U.S. exchanges was 10.70 billion shares, compared with the 10.60 billion average for the full session over the last 20 trading days.
Contributing to a risk-off mood on Wednesday, Bitcoin and ether plunged in the wake of China’s move to ban financial and payment institutions from providing cryptocurrency services.
The two main digital currencies fell as much as 30% and 45%, respectively, but they significantly stemmed their losses in afternoon trading after two of their biggest backers -- Tesla Inc chief Elon Musk and Ark Invest’s chief executive officer Cathie Wood -- reiterated their support for bitcoin.
Crypto-exchange operator Coinbase Global, miners Riot Blockchain and Marathon Digital Holdings saw their shares sharply decline on Wednesday.
Declining issues outnumbered advancing ones on the NYSE by a 2.15-to-1 ratio; on Nasdaq, a 1.71-to-1 ratio favored decliners. The S&P 500 posted 3 new 52-week highs and no new lows; the Nasdaq Composite recorded 34 new highs and 49 new lows.
The yield on 10-year U.S. Treasury notes was up 3.8 basis points to 1.680%, pulling back slightly from a day’s high of 1.6920%.
With files from Reuters
Read more:
Stocks that saw action on Wednesday - and why
Bitcoin selloff tests investors’ patience amid mounting setbacks
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