TORONTO — Canada's main stock index stalled in the afternoon after a morning of strong gains in energy, technology and base metals, while U.S. markets also cooled, ending the day with mixed results.
The S&P/TSX composite index was up 42.56 points at 19,857.07.
In New York, the Dow Jones industrial average was down 112.96 points at 33,517.65. The S&P 500 index was down 2.99 points at 3,892.09,while the Nasdaq composite was up 66.36 points at 10,635.65.
The Nasdaq in particular surged in the morning and remained elevated into the early afternoon, reaching as high as 2.25 per cent up before slowing to end the day on a modest close.
U.S. Treasury yields fell further on Monday after dropping Friday on data that showed wage growth was slowing, sparking optimism over the Federal Reserve's fight against inflation.
The Nasdaq was likely reacting to yields, which often influence the interest-rate-sensitive tech sector, said Michael Greenberg, SVP, portfolio manager, Franklin Templeton Investment Solutions.
“Since then, we've had a couple of Fed speakers come on, and just remind everyone that the inflation fight is kind of the main event for them. And they do see the need for rates to go higher and probably stay there longer,” he said.
However, if yields keep rising and stay elevated for longer than the market is expecting, that could be a headwind for the tech sector, said Greenberg.
Oil had an upward price day, once again buoyed by optimism over increased demand from China’s COVID re-opening. It was likely also pulled up by a weaker US dollar, said Greenberg.
“Those two things are kind of driving oil prices higher today. And that's good for the Canadian dollar. And it's good for at least certain parts of our equity market.”
The Canadian dollar traded for 74.76 cents UScompared with 74.15 cents US on Friday.
The February crude oil contract was up 86 cents at US$74.63 per barrel and the February natural gas contract was up 20 cents at US$3.91 per mmBTU.
Greenberg said he thinks there's an interesting fight going on between what the market believes is going to happen and what the Fed is saying it's going to do.
"I think the market believes that the Fed will raise rates more ... But in 2023, they will pivot to actually start having to cut rates as the year progresses," he said.
"And as the economy slows, the Fed is telling us they're not going to do that. So someone's wrong. We don't know who yet."
The February gold contract was up US$8.10 at US$1,877.80 an ounce and the March copper contract was up 12 cents at US$4.03 a pound.
This report by The Canadian Press was first published Jan. 9, 2023.
Companies in this story: (TSX:GSPTSE, TSX:CADUSD=X)
Rosa Saba, The Canadian Press
