S&P/TSX composite, U.S. markets fall on renewed worries about Omicron

·4 min read

Canada's main stock index slid along with other North American markets Monday as governments around the globe tightened COVID-19 restrictions in response to surging case counts of the new Omicron variant.

The S&P/TSX composite index was down 200.97 points at 20,538.22.

In New York, the Dow Jones industrial average plummeted 433.28 points to 34,932.16. The S&P 500 index dropped 52.62 points to 4,568.02 while the Nasdaq composite was down 188.74 points at 14,980.94.

“It is a pretty rough day, no doubt about it,” said Michael Currie, vice-president and investment adviser at TD Wealth. “Everyone’s talking about Omicron.”

Markets have bounced up and down ever since the Omicron variant was discovered in November, as investors appear to be weighing the potential severity of a fifth wave of COVID-19 and the impact it could have on economic activity, inflation and existing supply chain challenges.

On Monday, Quebec brought in a new round of capacity restrictions for bars, restaurants and gyms, while in the U.S., President Joe Biden will announce on Tuesday new steps he is taking to combat the virus.

The Dutch government began a tough nationwide lockdown on Sunday, while a U.K. official on Monday said he could not guarantee new restrictions would not be announced this week.

“We’re seeing a lot of restrictions or lockdowns come into place, which of course are bad for business," Currie said. "So even if Omicron itself isn’t as devastating as some people think, the fact that all of these lockdowns and restrictions are coming into place will have the same effect."

Markets were also being dragged down by the potential death blow over the weekend to a proposed $2-trillion spending program by the U.S. government, when an influential senator said he could not support it. In addition, markets are still absorbing last week's move by the Federal Reserve to more quickly remove the aid it's throwing at the economy because of rising inflation.

Sectors most affected by Monday’s stock slump were the industrials sector, which was down 2.5 per cent as airlines and travel-related companies fell on Omicron fears, and health care and technology — which were down 2.73 per cent and 1.76 per cent respectively.

Currie said investors were moving away from high valuation, high-growth companies over fears that inflation could be a drag on them. Two of the hardest hit stocks, for example, were cannabis companies Canopy Growth Corp., which was down 8.7 per cent in the day's trading, and Tilray Inc., which was down 5.95 per cent.

In spite of the rough trading day, Currie said it's important to note that while there have been up days and down days this month, both the TSX and the New York stock exchanges are heading into the last week of December very close to where they were at the end of November.

"At least for the month, it’s been pretty flat or just slightly down. So nothing to panic about yet," he said. "Although this is typically a very good time of year for markets. December is typically one of the stronger months, it’s billed as the 'Santa Claus rally' time of year. And we’re clearly not seeing that.”

The Canadian dollar traded for 77.27 cents US compared with 77.85 cents US on Friday.

The February crude contract was down $2.11 at US$68.61 per barrel and the March natural gas contract was up almost 11 cents at US$3.64 per mmBTU.

The February gold contract was down US$10.30 at US$1,794.60 an ounce and the March copper contract was down a fraction of a cent at US$4.29 a pound.

Also on Monday, BMO Financial Group announced it had signed a deal with French bank BNP Paribas to buy its U.S. subsidiary Bank of the West for US$16.3 billion.

But Currie said the deal appeared to have little affect on BMO's stock price, which closed down 1.92 per cent as other financial stocks also trended downward Monday.

"It hasn't had a dramatic impact on markets, but just the size of it stands out," Currie said of the BMO deal. “The fact that it is I believe the largest acquisition by a Canadian bank in the last 20 years certainly makes it a story."

— With files from The Associated Press

This report by The Canadian Press was first published Dec. 20, 2021.

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

Amanda Stephenson, The Canadian Press

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