TORONTO – The Toronto stock market extended its losses Thursday with resource stocks leading the way as oil and metal prices broke through important levels amid a strong American currency and worries about a faltering global economy.
The S&P/TSX composite index was well off early lows, coming back from a triple-digit loss as gold stocks turned positive. But the main index was still down 44.8 points to 14,760.64 following a 115-point tumble Wednesday as oil prices fell below US$90 a barrel for the first time since April 2013 and copper prices hit a six-month low.
The Canadian dollar was up 0.07 of a cent to 89.58 cents US.
U.S. indexes were largely lacklustre with the Dow Jones industrials down 3.66 points to 16,801.05 following a 238-point loss Wednesday. The Nasdaq gained 8.11 points to 4,430.2 and the S&P 500 index added 0.01 of a point to 1,946.17.
The mining sector fell one per cent with December copper down four cents to US$3 a pound. HudBay Minerals (TSX:HBM) gave back 25 cents to $9.15.
The TSX energy sector lost 0.75 per cent while November crude in New York edged up 28 cents to US$91.01 a barrel after tumbling as low as $88.18. Nymex crude is down around nine per cent year-to-date. The TSX sector is down about 12 per cent over the past month and was a major contributor to the Toronto market losing more than four per cent during September.
“The TSX has sold off primarily because it got ahead of itself, especially on the energy side of things,” said Kash Pashootan, portfolio manager at First Avenue Advisory in Ottawa, a Raymond James company.
Beyond economic worries, commodities have also suffered from a U.S. dollar that has strengthened sharply in recent weeks as a string of positive U.S. economic data persuaded some investors that the Federal Reserve will move to raise interest rates earlier than expected next year.
A higher U.S. dollar pressures commodities because a stronger greenback makes it more expensive for holders of other currencies to buy oil and metals which are dollar-denominated.
Another source of uncertainty has come from the impending end of the third and last instalment of the Fed’s quantitative easing program, which saw the central bank buy up massive amounts of bonds. The move was intended to keep long-term rates low and has been partly responsible for the sharp run up in markets since the lows of March 2009.
These pressures added up at a time when Toronto and New York markets were at or near record levels.
“We could assign a reason for it but the reality is the market is correcting because that’s what the market does,” added Pashootan. “We have had essentially 24 months of straight gains and valuations become frothy and at some point it corrects — it’s just the market being the market.”
Elsewhere on the TSX, financials were also a major weight with the group down per cent. Scotiabank (TSX:BNS) gave back 73 cents to $68.92.
The gold sector limited TSX losses as the group rose one per cent with December bullion down 40 cents to US$1,215.10. Goldcorp (TSX:G) was ahead 48 cents to C$26.93.
Canadian Pacific Railway (TSX:CP) was one of the few bright spots, ahead $11.89 to $234.70 a day after the company said it can double its profits and drive its revenues to $10 billion over the next four years. CEO Hunter Harrison said CP is aiming at a two-fold increase in earnings per share between this year and 2018.