TORONTO — Canadian and U.S. markets started September under pressure as signs of weakening economic activity pushed commodities and stocks lower.
A report on U.S. manufacturing showed the sector contracted for the fifth consecutive month, while a downward revision on copper prices also underlined the shifting outlook.
"The data is clearly pointing to some weakness on the economic front, which is driving markets lower," said Kevin Headland, chief investment strategist at Manulife Investment Management.
The S&P/TSX composite index closed down 303.73 points at 23,042.45.
The index was hit in part by Goldman Sachs slashing its copper outlook for next year to around US$10,000 a ton from US$15,000, said Headland.
"That's a material move lower. So that has really hurt at least Canada."
A potential increase in crude production from OPEC Plus also hasn't helped the resource heavy index, as crude fell more than four per cent.
The commodity pullback left the S&P/TSX base metals index down over seven per cent and the energy index down just over three per cent.
U.S. markets were also under pressure as the Institute for Supply Management's manufacturing report showed new orders contracting, deliveries slowing and other signs of contraction.
"That weaker economic demand and has really slowed things today," said Headland.
In New York, the Dow Jones industrial average closed down 626.15 points at 40,936.93. The S&P 500 index was down 119.47 points, or 2.1 per cent, at 5,528.93, while the Nasdaq composite was down 577.33 points, or 3.3 per cent, at 17,136.30.
Tech stocks were especially under pressure, including Nvidia down close to 10 per cent, but it was part of a wider pullback, said Headland.
"It's not specific to the tech sector, it just happens to be that area has done the best."
September has a long track record of being an especially rocky month for stocks but in this case there's a clear reason, he said, as elevated interest rates weigh on growth.
Rates could pull back a little in Canada on Wednesday as the Bank of Canada is set to announce its latest decision, where it's widely expected to make another quarter percentage point cut.
Markets are also looking ahead to the U.S. Federal Reserve decision later this month and will be closely watching the jobs numbers later this week, along with other indicators.
Investors expect the at least a quarter percentage point cut from the Fed, while there is some speculation it could start with an even bigger cut.
Headland said he doesn't see the larger cut as likely, but a shift is coming.
"Definitely, we are on the precipice of the rate cut cycle for the U.S.," he said.
The Canadian dollar traded for 73.81 cents US compared with 74.12 cents US on Friday.
The October crude oil contract was down US$3.21 at US$70.34 per barrel and the October natural gas contract was up seven cents at US$2.20 per mmBTU.
The December gold contract was down US$4.60 at US$2,523 an ounce and the December copper contract was down 12 cents at US$4.09 a pound.
This report by The Canadian Press was first published Sept. 3, 2024.
Companies in this story: (TSX:GSPTSE, TSX:CADUSD)
Ian Bickis, The Canadian Press
