S&P/TSX composite snaps three-day winning streak on growing COVID-19 worries

·4 min read

TORONTO — Canada's main stock index snapped a three-day winning streak as growing COVID-19 infections and spreading lockdowns muted some optimism about prospective vaccines. 

The decrease came after the S&P/TSX composite index at the Toronto Stock Exchange and the S&P 500 index in the U.S. rose 7.7 and 9.3 per cent, respectively, in November heading into Thursday trading.

"So as painful as these days are I think it's natural to have a little bit of profit-taking," said Mike Archibald, vice-president and portfolio manager with AGF Investments Inc.

He said catalysts for Thursday's correction were news that the White House is stepping back from talk of fiscal stimulus and that coronavirus cases hit a record 145,835 new cases in the United States on Wednesday.

There was a rush into safe havens with U.S. bonds doing well, gold up and consumer staples positive.

"It's just a bit of a perfect storm of a few different things; just the market being overbought and the cases spiking," he said in an interview.

Federal Reserve chairman Jerome Powell added that the U.S. economic outlook remained uncertain.

"With the virus spreading, the next few months could be challenging," Powell told an online conference held by the European Central Bank.

Stock markets ignited Monday after Pfizer announced that its COVID-19 vaccine had 90 per cent efficacy in trials.

Data expected in the coming days from Moderna on its vaccine could add to the vaccine excitement.

"The attention then really starts to shift to what is the commentary around the manufacturing capabilities and the ability to ramp up and when can doses realistically begin to be administered to the general public," Archibald said.

He doubts the reaction to Moderna's results will cause the same violent reaction that Pfizer's vaccine had in prompting a selloff of technology stocks and rotation into cyclical sectors such as financials, energy and REITs. 

"Clearly all three of those are under a little bit of pressure today after having a really solid three days to start this week." 

The S&P/TSX composite index closed down 191.96 points or 1.1 per cent to 16,582.18. 

In New York, the Dow Jones industrial average was down 317.46 points at 29,080.17. The S&P 500 index was down 35.65 points at 3,537.01, while the Nasdaq composite was down 76.84 points at 11,709.59. 

Archibald believes Thursday's pullback was temporary.

Selling pressure picked up after a strong market opening, but data such as jobless claims and the consumer price index in the U.S. didn't cause the "rush for the exits."

Weekly jobless claims fell last week to 709,000, the lowest level since March, from 757,000 in the prior week. Continuing claims remained high but decreased to 6.8 million from 7.2 million.

"With the lack of stimulus and new cases continuing to hit highs, you're likely going to see a little bit of pressure here until we get more clarity on vaccine timelines." 

The Canadian dollar traded for 76.20 cents US compared with 76.55 cents US on Wednesday. 

Nine of the 11 major sectors on the TSX fell, led by energy.

The sector lost 5.7 per cent with Canadian producers such as Vermilion Energy Inc. down 8.4 per cent and Suncor Energy Inc. off 6.2 per cent.

The decreases came as crude oil prices fell on a delayed report that U.S. inventories had a big unexpected build last week and the OPEC plus coalition of oil-producing countries were extending production cuts through to the end of 2022.

The December crude contract was down 33 cents at US$41.12 per barrel and the December natural gas contract was down 5.5 cents at US$2.98 per mmBTU. 

Archibald said its natural for energy company share prices to unwind after surging by 25 per cent on Monday.

Other sectors that fell include technology (down 2.2 per cent), consumer discretionary (down 1.7 per cent), real estate (down 1.6 per cent) and financials (down one per cent).

Materials and consumer staples were the only gainers. Materials rose 1.1 per cent on higher gold prices and a 20.8 per cent increase in shares of Intertape Polymer Group Inc. after reporting strong quarterly results.

The December gold contract was up US$11.70 at US$1,873.30 an ounce and the December copper contract was up 1.1 cents at US$3.14 a pound. 

This report by The Canadian Press was first published Nov. 12, 2020. 

Companies in this story: (TSX:ITP, TSX:VET, TSX:SU, TSX:GSPTSE, TSX:CADUSD=X) 

Ross Marowits, The Canadian Press