North American stock markets fall amid possible signal of rising U.S. interest rates
TORONTO - Blockbuster corporate earnings and economic data couldn't prevent global equity markets from falling towards the end of the trading week on renewed COVID-19 concerns and a possible signal that US interest rates may rise earlier than expected.
TORONTO - Blockbuster corporate earnings and economic data couldn't prevent global equity markets from falling towards the end of the trading week on renewed COVID-19 concerns and a possible signal that US interest rates may rise earlier than expected.
The S & P / TSX Composite Index closed 147.59 points at 19,108.33. That is a little higher in the week.
In New York, the Dow Jones industrial average fell 185.51 points to 33,874.85. The S&P 500 index lost 30.30 points to 4,181.17 while the Nasdaq Composite fell 119.87 points to 13,962.68, ending its sixth consecutive monthly gain.
Nearly 90 percent of more than half of US companies that have reported first quarter results to date have exceeded expectations, their highest level in years.
The GDP numbers in the US and Canada were excellent. Canada reported Friday that the economy grew 6.5 percent annually in the first quarter.
"So many positive things the markets digested, but on the flip side, there were a few bits of sound in the early afternoon that were more negative and accelerated losses," said Macan Nia, senior investment strategist at Manulife Investment Management.
Robert Kaplan, president of the US Federal Reserve in Dallas, a non-voting member of the Fed, hit the nail on the head on Friday that the central bank may need to raise interest rates and possibly cut some bond purchases in late 2022.
This is a different view from the Fed, which has consistently advised that the incentives continue through 2023.
"What was once a very consistent message from all members ... there seems to be some disagreement coming out," Nia said in an interview.
Chairman Jerome Powell endorsed the bank's stated approach, bringing up "foam in certain areas of the market" this week, as Kaplan did on Friday with US real estate.
Divergent views from the central bank could suggest that policy normalization may come sooner than expected, Nia said.
The central bank's view that inflation is not a major concern was also examined. The Fed has called inflation "temporary" but the main concern of executives this quarter has been rising input costs and inflation.
While the Bank of Canada has announced that it will reduce monetary stimulus, Nia says the Fed is in a difficult position as confirmation of similar measures now could lead to a disorderly sell-off in bond and equity markets.
"Maybe Kaplan, maybe some of these different views will come out, just bring the seed to market so that interest rates keep going up and the process gets neater," he said.
Nia said markets are paying much more attention to Fedspeak for signs of disagreement over messaging.
In addition to the Fed, investors are a little shaken by the rise in COVID infections in India and Brazil, as well as a UK study suggesting a dose of the Pfizer BioNTech vaccine could make recipients susceptible to coronavirus variants.
"That also scared the markets a little and dampened the mood today."
Friday was a risk-free day with all eleven major sectors of the TSX losing ground, led by technology, materials and energy.
Shopify Inc. fell 4.2 percent to push the sector down 1.8 percent.
Materials fell 1.4 percent on lower metal prices, with Eldorado Gold down 8.2 percent and First Quantum Minerals Ltd. fell by 3.9 percent.
The June gold contract fell 60 cents to $ 1,767.70 an ounce and the July copper contract fell 1.85 cents to nearly $ 4.47 a pound.
Growing concerns about the spread of virus cases in India and Brazil have lowered crude oil prices amid concerns about lower demand.
The June crude oil contract fell $ 1.43 to $ 63.58 a barrel, and the June natural gas contract rose two cents to $ 2.93 per mmBTU.
The shares of MEG Energy Corp. declined four percent, while Whitecap Resources Inc. lost 2.5 percent. Imperial Oil had a good day, up 4.8 percent after increasing its dividend.
The Canadian dollar traded at 81.40 US cents, compared with 81.35 US cents on Thursday.
The markets ended a solid month in April with the TSX up 2.2 percent and up 9.6 percent in 2021.
"It's been a very good year so far and the markets are not rising in a straight line," said Nia.
"We have these ebb and flow and this is an example of two advances we've made and then we're going to take a step back today."
This Canadian press report was first published on April 30, 2021.
Companies in this story: (TSX: ELD, TSX: TM, TSX: SHOP, TSX: MEG, TSX: WCP, TSX: IMO, TSX: GSPTSE, TSX: CADUSD = X)
Ross Marowits, the Canadian press
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