North American stock markets lose momentum on variant concerns and Fed action

·4 min read
North American stock markets lose momentum on variant concerns and Fed action

TORONTO — North American stock markets fell back after a strong morning to start December on persistent worries about the latest COVID-19 variant and the likelihood for the Fed to speed up its stimulus tapering.

The S&P/TSX composite index gained as much as 352 points or 1.7 per cent in early trading Wednesday but closed down 195.39 points to a six-week low of 20,464.60.

U.S. stock markets followed similar paths, with the Dow Jones industrial average ending the day down 461.68 points at 34,022.04 after climbing as much as 1.5 per cent. The S&P 500 index was down 53.96 points at 4,513.04, while the Nasdaq composite was down 283.64 points or 1.8 per cent at 15,254.05.

Market sentiment soured after the U.S. Centers for Disease Control and Prevention announced the country's first case of the Omicron variant was found in California.

While the variant was expected to make its way to the U.S. after being identified in several countries, including Canada, it still caused concern and volatility in broader stock markets, said Mike Archibald, vice-president and portfolio manager with AGF Investments Inc.

"Today's action is fairly concerning," he said in an interview. "Clearly the tone of the market is changing here near-term and people are obviously seeking some level of defensiveness and raising cash."

The TSX60 that includes Canada's largest companies was down 0.4 per cent while the TSX Smallcap index was down 2.3 per cent.

"So clearly there's a move away from riskier higher beta stocks into areas of more safety," he said.

Archibald said he expects COVID variant headlines will prompt market volatility for several weeks until investors get comfortable with what that means.

"We're probably going to continue to see fairly wild swings like we did today."

The pace of U.S. central bank tapering was also top-of-mind for a second day as Federal Reserve chairman Jerome Powell once again signalled Wednesday that it could speed up the reduction in bond purchases and advance the start of interest rate hikes. He also testified to Congress that it's not certain that inflation will slow in the second half of next year as many economists expect.

The movement in crude oil prices mirrored broader market volatility. They climbed as much as 3.7 per cent and ended down about one per cent as a meeting of OPEC and its allies failed to deliver any signals on possible changes to production plans.

The January crude oil contract was down 61 cents at US$65.57 per barrel and the January natural gas contract was down 30.9 cents at nearly US$4.26 per mmBTU.

The energy sector lost 1.9 per cent as shares of Arc Resources Ltd. fell 4.9 per cent and Tourmaline Oil Corp. was 3.7 per cent lower.

Archibald said the market is hoping that OPEC+ will hold off on the additional 400,000 barrels of output in January.

"It's unclear as to whether or not that's going to happen," he said, noting the OPEC meeting continues on Thursday.

The Canadian dollar traded for 78.27 cents US compared with 78.17 cents US on Tuesday.

Healthcare lost 5.3 per cent with cannabis producers Tilray Inc. down 8.1 per cent and Canopy Growth Corp. off 7.1 per cent.

Materials was down 2.2 per cent despite higher gold prices as shares of Lithium Americas Corp. decreased 11.2 per cent.

The February gold contract was up US$7.80 at US$1,784.30 an ounce and the March copper contract was down 3.25 cents at almost US$4.25 a pound.

Technology was down 2.7 per cent with Lightspeed Commerce Inc. off 7.1 per cent and Shopify Inc. down 3.5 per cent.

The heavyweight financials sector was one of two sectors in positive territory on the TSX along with telecommunications. Financials rose 0.4 per cent with Bank of Nova Scotia up 3.4 per cent and Toronto-Dominion Bank up two per cent.

National Bank of Canada lost 3.5 per cent despite announcing a 23 per cent increase in its dividend as the Montreal-based bank posted light quarterly results.

This report by The Canadian Press was first published Dec. 1, 2021.


Ross Marowits, The Canadian Press

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