S&P/TSX composite slightly down, helped by energy stocks; U.S. markets fall

TORONTO — Canada’s main stock index edged lower Thursday, with losses in technology and industrials buoyed by energy stocks, while U.S. stock markets were also down.  

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The S&P/TSX composite index was down 34.79 points at 20,341.44.

In New York, the Dow Jones industrial average was down 252.40 points at 33,044.56. The S&P 500 index was down 30.01 points at 3,898.85, while the Nasdaq composite was down 104.74 points at 10,852.27.

In what seems to be the theme of the week for U.S. data, housing starts and first-time jobless claims data released Thursday were both weaker than expected, and U.S. markets reacted negatively, said Kevin Headland, chief investment strategist at Manulife Investment Management.

Meanwhile, markets in Canada held their ground against U.S. markets’ slump thanks to higher oil prices and energy stocks, he said. 

Federal Reserve Vice Chair Lael Brainard said Thursday that with inflation easing in the U.S., the central bank’s interest rate hikes could end up cooling inflation without causing significant damage to the labour market. While the Bank of Canada is widely expected to announce a quarter of a percentage point hike this month, consensus is less clear on whether the Fed will announce the same or a half percentage point hike soon after. 

While in previous months markets reacted positively to any sign of economic weakening, taking it as a signal that central banks might slow their tightening, in 2023 the tables are starting to turn, said Headland.

Investors’ reactions are transitioning away from the macro and back towards the micro, he said.

“I think this time around the market is starting to realize that this is … less of an issue with the Fed and more so an issue with economic weakness and perhaps the risk of recession, which would feed through the earnings growth environment,” said Headland. 

With the height of inflation in the rearview mirror, the next hurdle for markets is this weaker economic environment and an earnings season that will likely see a lot of differentiation between companies and sectors, he said. 

Every economic release, like Canadian retail sales to come Friday, adds to an increasingly clearer image for investors of how the market is faring, said Headland. 

And whether the picture itself is positive or negative, more clarity is a good thing, he said. 

The Canadian dollar traded for 74.23 cents UScompared with 74.41 cents US on Wednesday.

The March crude oil contract was up 81 cents at US$80.61 per barreland the February natural gas contract was down four cents at US$3.28 per mmBTU.

The February gold contract was up US$16.90 at US$1,923.90 an ounce and the March copper contract was down less than a penny at US$4.23 a pound.

— With files from the Associated Press

This report by The Canadian Press was first published Jan. 19, 2023.

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

Rosa Saba, The Canadian Press