North American markets fall despite record start as U.S. stimulus talks hit snag

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TORONTO — North American stock markets faded following a strong start Friday after U.S. stimulus negotiations hit a snag.

The three U.S. markets hit record highs in morning trading before falling on political infighting that prevented U.S. lawmakers from reaching a deal to help Americans to weather the storm caused by rising COVID-19 infections and lockdowns.

The S&P/TSX composite index closed down 118.31 points at 17,534.63, after hitting an intraday high of 17,676.60.

In New York, the Dow Jones industrial average was down 124.32 points at 30,179.05 after reaching 30,343.59 in earlier trading.

The S&P 500 index lost 13.07 points at 3,709.41 after hitting 3,726.70, while the Nasdaq composite was down 9.11 points at 12,755.64 after reaching 12,809.60.

"Today, some of the messaging regarding stimulus out of the U.S. was a little foggy," said Allan Small, senior investment adviser at HollisWealth.

Negotiations on nearly US$1 trillion in relief had seemed to be on the brink of success, providing benefits for laid-off workers and cash payments to most Americans.

An impasse surfaced, however, after Republicans tried to rein in emergency Federal Reserve lending powers that Democrats feared would deprive president-elect Joe Biden of crucial tools to manage the economy.

The government would shut down just after midnight unless Congress passed a stopgap spending bill. House leaders hoped to pass a two-day stopgap spending bill, but Senate passage was by no means certain.

Canada's main stock index was headed toward its seven-straight weekly gain before slipping to end the week down.

Nine of the 11 major sectors on the TSX were lower, including the three largest — financials, energy and materials.

Materials decreased 1.5 per cent as gold prices slipped on a stronger U.S. dollar. Oceanagold Corp. was down 5.9 per cent.

The Canadian dollar traded for 78.28 cents US compared with 78.63 cents US on Thursday.

The February gold contract was down US$1.50 at US$1,888.90 an ounce and the March copper contract was up about 3.1 cents US at US$3.63 a pound.

The heavyweight financials sector was down with all banks but Canadian Imperial Bank of Commerce losing ground.

Energy slipped even though oil prices rose to their highest level since February. Canadian Natural Resources Ltd. and Suncor Energy Inc. were down 1.2 and one per cent, respectively, in heavy trading.

The February crude contract was up 70 cents US at US$49.24 per barrel and the January natural gas contract was up 6.4 cents US at just over US$2.70 per mmBTU.

Small said COVID vaccines, including the likely approval of Moderna's offering, is giving the crude a lift.

"I just think overall, the market is really looking ahead to a time where we get out of this shutdown, virus shutdown sort of life," Small said in an interview.

"And obviously, when growth comes back, that's good for what we call the reopening stocks … such as energy."

The technology sector fell on a 15.8 per cent drop in shares of BlackBerry Ltd. after it reported a bigger net loss in its latest financial quarter.

Real estate was also down with several REITs off about three per cent. Industrials slipped after shares of Air Canada decreased 2.4 per cent.

The only winning sectors were consumer discretionary and telecommunications, both of which rose only slightly.

Even though the overall tone of the market Friday was a little negative, Small said that's OK given that the last few days were decent.

He said the strength of markets in November took some thunder from December, with the TSX up 1.9 per cent but not as strongly as some had expected.

"Perhaps we'll get an end-of-year Santa Claus rally and start to pick up again in January. But I think to see it moving sideways-ish is normal, especially when you look at how November was so good."

This report by The Canadian Press was first published Dec. 18, 2020.

Companies in this story: (TSX:BB, TSX:AC, TSX:OGC, TSX:CNQ, TSX:SU, TSX:CM, TSX:TSX:GSPTSE, TSX:CADUSD=X)

Ross Marowits, The Canadian Press