TORONTO — A sea of red swamped North American stock markets midweek as higher-than-expected inflation in Canada and cost pressures on large U.S. retailers soured sentiment and drove Canada's main stock index down by nearly 400 points.
Michael Currie, vice-president and investment adviser at TD Wealth, said it was the worst day for major U.S. markets since 2020.
In New York, the Dow Jones industrial average was down 1,164.52 points at 31,490.07. The S&P 500 index was down 165.17 points at 3,923.68, while the Nasdaq composite was down 566.37 points or 4.7 per cent at 11,418.15.
The S&P/TSX composite index held up better, closing down 389.63 points or 1.9 per cent to 20,101.38.
Currie said very few stocks were up on the day in either countries in as broad a sell-off as you can get.
The Toronto market was hit by some pretty bad inflation data as the consumer price index for April set a new three-decade high by rising 6.8 per cent compared with a year ago, up from a gain of 6.7 per cent for March.
In the U.S., markets reacted to Federal Reserve chairman Jerome Powell's comments a day earlier in which he said the central bank would take a hard line on raising rates to fight inflation.
"I know recession is in the back of everybody’s minds but right now it seems to be all about inflation," Currie said in an interview.
Wednesday's big declines came a day after markets rebounded.
The old pattern when markets were doing well was for investors to buy the dip.
"Now we're seeing just the opposite in the last six months ... People are using any up day as an opportunity to sell," he said.
While Tuesday's gains were backed by strong U.S. retail sales, weak results from Target that came a day after Walmart disappointed, prompted some panic. Target's shares sank 25 per cent while Walmart fell seven per cent after losing 11 per cent on Tuesday for its largest drop in almost 35 years.
The large retailers pointed to higher costs for fuel, transportation and employee salaries that were hurting margins. The weakness trickled down to share prices of other U.S. retailers, including Amazon, Best Buy, Kohl's and Dollar General.
"The sense is if Walmart and Target can't figure this out, what chance do the other guys have," said Currie.
The exception was Winners parent company, TJX Companies Inc., which rose 7.1 per cent after beating expectations.
Ten of the 11 major sectors on the TSX were lower, led by health care and consumer discretionary, which were down 4.4 and 4.1 per cent, respectively. Consumer staples was off 3.8 per cent.
Energy, financials, industrials, technology and materials were each off 1.6 to 2.5 per cent.
Energy fell with shares of Vermilion Energy Inc. off 5.0 per cent as crude prices softened.
The July crude contract was down US$2.59 at US$107.04 per barrel and the June natural gas contract was up 6.4 cents at US$8.37 per mmBTU.
Despite lower U.S. inventories and Russia saying oil sales were down nine per cent, prices were lowered by refiners ramping up production.
Materials fell 2.5 per cent as metals prices dropped on a stronger U.S. dollar with Interfor Corp. down 9.9 per cent and First Quantum Minerals Ltd. down 5.5 per cent.
The June gold contract was down US$3.00 at US$1,815.90 an ounce and the July copper contract was down 6.1 cents at US$4.18 a pound.
The Canadian dollar traded for 77.88 cents US compared with 77.92 cents US on Tuesday.
Technology was moved lower with Dye & Durham Ltd. shares plunging 11.8 per cent, while Hut 8 Mining Corp. was down 6.5 per cent.
Utilities inched higher near closing.
This report by The Canadian Press was first published May 18, 2022.
Companies in this story: (TSX:VET, TSX:DND, TSX:HUT, TSX:IFP, TSX:FM, TSX:GSPTSE, TSX:CADUSD=X)
Ross Marowits, The Canadian Press