Canada's main stock index dipped on Monday, dragged down by losses in the energy and tech sectors while U.S. markets were mixed.
The S&P/TSX composite index was down 35.24 points at 22,779.57.
In New York, the Dow Jones industrial average was down 49.41 points at 40,539.93. The S&P 500 index was up 4.44 points at 5,463.54, while the Nasdaq composite was up 12.32 points at 17,370.20.
Hadiza Djataou, fixed income portfolio manager with Mackenzie Investments, said Bay Street appeared to be taking a breather Monday after an extended winning streak that saw the TSX climb to record heights earlier this month.
Investors may also have been taking time to catch their breath given how much market-moving news is happening this week, Djataou said. In the spotlight is an upcoming interest rate announcement by the U.S. Federal Reserve, which is slated to wrap up its two-day meeting Wednesday.
Most observers do not expect the U.S. central bank to lower interest rates this time around, and are instead forecasting a cut in September.
“We expect potentially (U.S. Fed Chair Jerome) Powell to be dovish now that he's hinted that September is going to see rate cuts. And that should be supportive for risk assets in general and especially for equities," said Djataou.
A highly anticipated U.S. jobs report is also set to be released Friday, and that could give markets added certainty about the Fed’s thought process heading into fall.
While the prospect of future interest rates has been a boost for markets this summer, there are still a number of unknowns, Djataou said.
Markets had started to bank on former U.S. president Donald Trump returning to the White House in November, an assumption that had lifted stocks earlier this month on the premise that a Republican administration will mean less onerous regulation on industry.
But new polls showing a surge in popularity among U.S. voters for Democratic Vice-President Kamala Harris are making that assumption increasingly uncertain.
In addition, the TSX — which is heavily exposed to the energy sector — was being dragged down Monday by the price of crude oil, which has been sliding for weeks.
"It is less a supply dynamic and more a demand dynamic, in that the demand has been weaker than expected for oil," Djataou said, adding crude has been in a slump due to ongoing disappointing economic data out of China, whose massive economy plays a major role in driving global oil demand.
The September crude oil contract was down US$1.35 at US$75.81 per barrel and the September natural gas contract was down one-and-a-half cents at US$2.04 per mmBTU.
The S&P/TSX capped energy index lost 0.96 per cent Monday, while the volatile Canadian tech sector also took a hit.
The Canadian dollar weakened against the U.S. greenback for an eighth straight day, and Djataou said she believes it has room to fall further due to the divergence in monetary policy between Canada — which has already seen two interest rate cuts — and the U.S., which has yet to start cutting rates.
The Canadian dollar traded for 72.18 cents US compared with 72.31 cents US on Friday, according to XE.com.
The December gold contract was down US$2.40 at US$2,425.50 an ounce and the September copper contract was down four cents at US$4.08 a pound.
Djataou pointed out that in spite of Monday's market correction, the TSX is still up significantly year-to-date. That's both positive for investors, and a potential risk, she said.
"(Stock) valuations are rich. And any unforeseen event — geopolitical, you name it — could lead to a sell-off," she said.
"We're very mindful that there's potential re-pricing risk overall."
This report by The Canadian Press was first published July 29, 2024.
Companies in this story: (TSX:GSPTSE, TSX:CADUSD)
Amanda Stephenson, The Canadian Press
