S&P/TSX composite gives up early gains to fall on repositioning away from tech

·4 min read

TORONTO — Canada's main stock index gave up early gains to fall for a third day this week as investors repositioned from the technology sector towards energy, financials and industrials.

Technology was the big laggard Wednesday amid the shift away from growth sectors of the market that thrived during last year's downturn.

It caused the tech-heavy Nasdaq composite to decline and in Canada pushed the sector down nearly three per cent with Lightspeed POS Inc. falling six per cent, Shopify Inc. off 4.9 per cent and BlackBerry Ltd. down 4.7 per cent.

"Mega-cap tech stocks came under pressure as investors rotated out of these expensive corners of the market and embraced the reflationary, reopening trade that bodes well for the value-oriented sectors whose fortunes are closely tied to the health of the global economy," said Candice Bangsund, portfolio manager for Fiera Capital.

Materials was lower even as gold prices rose after two straight days of declines as the attractiveness of bullion increased as bond yields drifted lower.

The April gold contract was up US$8.10 at US$1,733.20 an ounce and the May copper contract was down 1.55 cents at US$4.06 a pound.

Forest products producers Canfor Corp. and Interfor Corp. sustained the biggest drops in the sector, falling 6.7 and 6.2 per cent, respectively.

Cannabis producers moved lower to push health care down 3.2 per cent with Aurora Cannabis Inc. and Aphria Inc. each off 4.1 per cent.

Energy had powered the market higher for much of the day as a blockage in the Suez Canal caused the price of oil to once again top US$60 per barrel.

The Ever Given, a Panama-flagged ship that carries cargo between Asia and Europe, became wedged across the waterway on Tuesday, blocking traffic in one of the world's most important corridors for international trade.

Crude oil price rose on the potential for supply bottlenecks, although the effects could be fleeting if shipping resumes in the coming days, Bangsund wrote in an email.

The May crude oil contract was up US$3.42 at US$61.18 per barrel and the May natural gas contract was up 1.4 cents at US$2.57 per mmBTU.

The sector rose 3.4 per cent as shares of several Canadian producers saw large gains. Vermilion Energy Inc. increased 6.3 per cent, while MEG Energy Corp. and Imperial Oil each climbed 5.2 per cent.

"After an erratic week in energy markets, crude oil regained some notable ground alongside today’s broad revival in risk appetite," Bangsund said.

Signs of stronger gasoline demand also boosted prices after the weekly inventory report from the Energy Information Administration revealed a rebound in domestic fuel consumption even as inventories were reported to have climbed last week, she added.

The Canadian dollar traded for 79.61 cents US, unchanged from Tuesday despite rising for much of the day.

The S&P/TSX composite index closed down 41.51 points to 18,628.29 after hitting an intraday high of 18,789.83.

In New York, the Dow Jones industrial average lost 3.09 points at 32,420.06. The S&P 500 index was down 21.38 points at 3,889.14, while the Nasdaq composite gave up 265.81 points or two per cent at 12,961.89.

Financials moved higher as the Bank of Montreal and the Canadian Imperial Bank of Commerce saw shares increase.

Air Canada shares climbed 2.6 per cent and CN Rail was up 2.2 per cent to help the industrials sector.

Bangsund said investors welcomed signs of a stabilization in bond yields following last week’s sharp spike, with the yield on the 10-year U.S. Treasury falling to 1.619 per cent.

The dip followed Senate testimony by Federal Reserve chairman Jerome Powell and Treasury Secretary Janet Yellen.

Powell allayed fears of runaway inflation and said higher bond yields were mostly a sign of confidence among investors that the economy is improving.

"That has been an orderly process,'' he said. "I would be concerned if it were not an orderly process'' or if rates went high enough to limit borrowing and spending and slow the economy.

This report by The Canadian Press was first published March 24, 2021.

Companies in this story: (TSX:LSPD, TSX:SHOP, TSX:BB, TSX:CNR, TSX:AC, TSX:BMO, TSX:CM, TSX:MEG, TSX:VET, TSX:IMO, TSX:GSPTSE, TSX:CADUSD=X)

Ross Marowits, The Canadian Press