North American markets retreat; tech, crypto stocks fall sharply

·3 min read

Canada's main stock index fell Friday, part of a broad-based retreat that also affected U.S. markets and brought with it significant losses in technology and cryptocurrency stocks.

The S&P/TSX composite index closed down 153.99 points at 20,111.38.

In New York, the Dow Jones industrial average closed down 292.30 points at 33,706.74. The S&P 500 index was down 55.26 points at 4,228.48, while the Nasdaq composite closed down 260.12 points at 12,705.22.

The risk-off sentiment affected growth sectors the most. The S&P/TSX capped information technology index slid 3.29 per cent on the day, and losses in the mining sector also drove the capped materials index down 1.56 per cent.

Cryptocurrencies fell broadly as Bitcoin slumped 8.5 per cent to $21,434, according to CoinDesk. Toronto-based crypto miner Hut 8 Mining Corp. slid 14 per cent Friday.

The slump put an end to what had been a strong run for equities in the past five weeks, though it’s still unclear whether Friday’s selloff is indicative of more significant storm clouds ahead.

“It’s always better in hindsight, but we’ve had a really, really solid move in the last month-and-a-half in stock markets. It seems like it’s a reasonable spot for some level of consolidation here over the next couple of weeks,” said Mike Archibald, vice-president and portfolio manager with AGF Investments.

Markets have been rallying in recent weeks on investor sentiment that perhaps the most heavy-handed interest rate hikes by central bankers are over, Archibald said. It’s not clear that’s the case, however — minutes of the U.S. Federal Reserve's July meeting released this week said inflation is still is too high and made clear the central bank will keep raising interest rates.

Many analysts still expect the U.S. Federal Reserve to announce a 50 or even 75-basis point increase at its next rate announcement in September. Archibald said all eyes will be on the Fed's meeting in Jackson Hole, Wyo. next week to see if Chair Jerome Powell makes any comments that might indicate which way the central bank is leaning.

“We should get a little bit more clarity on that over the coming week, and that should determine whether this (market retreat) is a shallow pullback, or if we’re in for something a little more serious,” he said.

Concerns about inflation and the health of the global economy intensified Friday as new economic data out of Germany showed producer prices in Europe's largest economy saw the biggest increase on record in July.

That news made investors jittery, and immediately sent German bond yields higher. North American bond yields quickly followed suit.

“We are seeing a really solid move higher in bond yields here today — up almost 10 basis points depending on what market you’re looking at," Archibald said. (A basis point is one-hundredth of a percentage point.)

Markets are also watching closely to see what impact inflation is having on consumer spending. Statistics Canada said Friday that Canadian retail sales increased 1.1 per cent to $63.1 billion in June, boosted by higher sales at gasoline stations and motor vehicle and parts dealers.

However, the agency said its preliminary estimate for July suggests retail sales for that month fell 2.0 per cent, though it cautioned the figure would be revised.

The Canadian dollar traded for 76.98 cents US compared with 77.35 cents US on Thursday.

The October crude oil contract was up 33 cents at US$90.44 per barrel and the September natural gas contract was up 15 cents at US$9.34 per mmBTU.

The December gold contract was down US$8.30 at US$1,762.90 an ounce and the September copper contract was up three cents at US$3.66 a pound.

This report by The Canadian Press was first published Aug. 19, 2022.

Companies in this story: (TSX:GSPTSE, TSX:CADUSD=X)

Amanda Stephenson, The Canadian Press