Stock markets drop after early climb

North American markets started the week higher but again dropped at the end of the day, this time pushed deeper on renewed trade threats against China from U.S. President Donald Trump.

Early trading was a reflex reaction as investors bought into last week’s weakness, said Craig Fehr, Canadian markets strategist for Edward Jones.

The S&P/TSX composite index gained 131 points early, but then closed down 166.51 points or more than one per cent to 14,721.75. That’s the lowest level since July 8, 2016.

“I think it’s a reflection of the lack of conviction that we have in the market right now,” Fehr said in an interview.

“I think investors by and large have been a little shell-shocked by the volatility of recent weeks.”

Fehr said the fundamental backdrop for the market, including improved corporate earnings, the economy and interest rates, remain positive. But market swings have sapped the conviction of the bull market.

“So I think we’re probably due for more swings like this, kind of intraday swings and daily swings that are reflective of low conviction at the moment.”

All sectors on the TSX lost ground on Monday, led by cannabis-heavy health care which was down more than 10 per cent. Aphria Inc. closed down 17.35 per cent, Canopy Growth Corp. 14.12 per cent and Aurora Cannabis 16.10 per cent.

The energy sector closed off more than three cent as the price of crude oil continued to fall as investors remained concerned about slowing global demand led by weakness in China.

In New York, the Dow Jones industrial average was down 245.39 to 24,442.92. The S&P 500 index was off 17.44 points to 2,641.25, while the Nasdaq composite lost 116.92 points to 7,050.29.