TORONTO — Canada's main stock index fell more than 200 points Monday in a broad-based decline, while U.S. stock markets also moved lower.
Base metals, utilities and telecom stocks helped lead the TSX lower. The S&P/TSX composite index was down 213.20 points at 20,871.89.
In New York, the Dow Jones industrial average was down 274.30 points at 38,380.12. The S&P 500 index was down 15.80 points at 4,942.81,while the Nasdaq composite was down 31.28 points at 15,597.68.
Earnings continued to roll in south of the border, with McDonald’s disappointing on revenue while Estee Lauder exceeded market expectations.
Around half of companies on the S&P 500 have reported earnings so far, said Adelaide Chiu, portfolio manager, vice-president and head of responsible investing at NEI Investments.
“I think the outlook in general has been moderate,” she said, “especially if you were to think about some of the valuations on some of the stocks that have delivered the growth.”
Expectations have been particularly high for the major tech companies, which have been outperforming the market, she said.
“For those companies to really meet those expectations and the valuations that the market is affording them today, there's a lot of growth ahead,” said Chiu.
But the overall market isn’t seeing that same level of growth, she said.
Economic uncertainty has been weighing on other sectors like energy and resources, said Chiu.
A new economic report showed stronger growth in the U.S. services sector than expected, prompting bond yields to move higher Monday.
Last week, investors were faced with confirmation from the U.S. Federal Reserve that interest rate cuts were unlikely to begin in March.
“I think the market was expecting cuts to happen a lot sooner in 2024,” said Chiu.
Fed chairman Jerome Powell reiterated in a broadcast interview Sunday that cuts are probably not in the cards for March. He said the central bank may cut three times this year as inflation has been cooling.
In Canada, where the economy has weakened much more than the U.S. in part because of the structure of the housing market, the central bank is walking a very thin line, said Chiu.
“Canada is in a very challenging position today, because they also need to manage the consumer and the consumer is more indebted today than the U.S. consumer,” she said.
Nevertheless, the market has probably baked in an eventual soft landing for both Canada and the U.S., even if it’s been a shakier one north of the border, she said.
“What we're going to see going forward is probably not as bad as everyone thought.”
The Canadian dollar traded for 73.93 cents US compared with 74.33 cents US on Friday.
The March crude contract was up 50 cents at US$72.78 per barrel and the March natural gas contract was down less than one cent at US$2.08 per mmBTU.
The April gold contract was down US$10.80 at US$2,042.90 an ounceand the March copper contract was down five cents at US$3.77 a pound.
-- With files from The Associated Press
This report by The Canadian Press was first published Feb. 5, 2024.
Companies in this story: (TSX:GSPTSE, TSX:CADUSD)
Rosa Saba, The Canadian Press
