TSX ekes out a minor gain; loonie slides

TORONTO — Canada’s main stock index managed to eke out a minor gain Tuesday as U.S. stocks closed sharply higher after another volatile day.

The Toronto Stock Exchange’s S&P/TSX composite index was ahead 29.12 points or 0.19 per cent at 15,363.93, led by strong gains in the health-care and base metals sectors.

Trading was choppy in the early going Tuesday, after the TSX plunged in initial trading before paring its losses to 61.64 points or 0.4 per cent by mid-afternoon.

In New York, the S&P 500 — a broader market barometer that is comparable to the TSX — was up 46.20 points or 1.74 per cent at 2,695.14. The Nasdaq composite index was up 148.35 points or 2.13 per cent at 7,115.88.

“I’m not sure anything can surprise me at this point, however I do wish I had a degree in psychology ... because so much of this market is being led by the psychology of investing,” said Craig Jerusalim, portfolio manager of Canadian equities at CIBC Asset Management.

“At least today, earnings are quite robust and it’s all price that’s coming down.”

While many market observers say a correction was expected after a decade-long bull run, the trigger that sparked the sudden downturn is thought to be U.S. figures released last Friday that suggested long-anticipated wage growth has started to kick in, resulting in inflation and a greater potential for the U.S. Federal Reserve to raise interest rates.

An increase in interest rates pushes bond yields higher and makes such fixed-income investments more attractive and thus, bets on corporate earnings and dividends less attractive.

The Toronto exchange had experienced a longer six-day decline prior to Tuesday’s close, but drops have not been as steep as in U.S. markets. It ended last week down four per cent before closing down another 1.7 per cent Monday as the downward pressure on markets around the world took Canada’s largest exchange down with it.

“The TSX was already trading at a discount to the U.S. markets so there wasn’t that much to correct,” said Jerusalim.

The commodity-heavy index’s continued selloff is an indication that after a long period of market stability, investors are getting reacquainted with volatility, says Kash Pashootan, CEO and chief investment officer at First Avenue Investment Counsel Inc. in Toronto.

“Monday was the first taste of meaningful volatility that we’ve had in over six years and so investors were trying to figure out what to do and how to handle it.”