S&P/TSX composite edges lower on lower crude prices, U.S. stock markets up

·3 min read

TORONTO — Canada's main stock index diverged from its U.S. peers ahead of a busy week with the Bank of Canada expected to taper stimulus measures and the U.S. earnings season getting underway.

The S&P/TSX composite index closed down 24.87 points at 20,233.08.

In New York, two of the markets had record days with S&P 500 index ending up 15.08 points at 4,384.63, while the Nasdaq composite was up 31.32 points at 14,733.24. Both set record intraday highs.

The Dow Jones industrial average was up 126.02 points at 34,996.18.

U.S. banks led the S&P to the record gains as long-term bond yields increased to 1.37 per cent.

Canada's financial sector led the four sectors that climbed on the day with Royal Bank of Canada shares increasing 1.1 per cent.

Second-quarter U.S. results that will start to be reported later this week with banks are expected to be very strong when compared with results a year ago in the depths of the pandemic and the economic shutdown.

Quarterly earnings are expected to grow 64 per cent, which would be the biggest growth rate since 2009.

"What investors are looking for is trends in loan growth to gauge how the economic rebound and recovery is progressing," said Angelo Kourkafas, investment strategist at Edward Jones.

Strong results is a necessity given that he thinks valuations have peaked and will be a driver of stock prices moving higher from here after rallying sharply in the first half of the year.

"Lower oil and gold prices are probably a drag on the TSX, but again, performance is pretty muted across the board," he said in an interview.

The energy and industrials sector were the biggest laggards on the day.

Energy lost 1.2 per cent as crude prices dipped as uncertainty continues a week after negotiations collapsed at last week's OPEC meeting over increased supply.

"Prices have dipped a bit in part since there is a risk that if we don't have an agreement that could evolve into the coalition dissolving and then therefore members are going to pump as much as they want," Kourkafas said, adding that's not the base case scenario.

There's also pressure from a global rise in the number of cases of the Delta variant of COVID-19.

The August crude oil contract was down 46 cents at US$74.10 per barrel and the August natural gas contract was up 7.5 cents at US$3.75 per mmBTU.

Shares of Vermilion Energy Inc. were down 2.3 per cent, followed by Cenovus Energy Inc. at 2.2 per cent and Crescent Point Energy Corp. at two per cent.

The Canadian dollar traded for 80.19 cents US compared with 80.15 cents US on Friday.

The loonie's path this week could be determined by Wednesday's Bank of Canada meeting at which it is expected to cut its weekly bond purchases to $2 billion from $3 billion.

"Last week's fairly strong jobs report provides some confidence to policy-makers that they're they're going to continue towards that path of providing less accommodation," Kourkafas added.

In addition, vaccination rollouts are progressing.

Federal Reserve chairman Jerome Powell is expected to repeat at congressional hearings on Wednesday and Thursday that inflation is temporary.

Materials was also lower on the TSX as metals prices were lower.

The August gold contract was down US$4.70 at US$1,805.90 an ounce and the September copper contract was down three cents at US$4.32 a pound.

Industrials dropped as Canadian National Railway Co. and Canadian Pacific Railway Ltd. were off 1.5 and 1.4 per cent, respectively, while Air Canada shares were also lower.

This report by The Canadian Press was first published July 12, 2021.


Ross Marowits, The Canadian Press

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