Investors’ wake-up call batters stocks
TORONTO — Canada’s main stock index hit a six-month low Thursday while U.S. stock markets suffered another selloff day as investors are pricing in political and trade uncertainties they’ve long overlooked.
The result is they have now woken up to issues that have existed for the last six to 12 months, says Kash Pashootan, CEO and chief investment officer at First Avenue Investment Counsel Inc.
“The longer they shrug them off the more of a price we have to pay at some point,” he said in an interview.
“When you’re trying to price in uncertainties that have existed for six, 12, 18 months over four or five trading sessions, of course you’re going to feel that in the markets.”
The S&P/TSX composite index closed down 200.27 points to 15,317.13, the lowest level since April with 389 million shares traded. The 1.3 per cent selloff came a day after the TSX shed more than 330 points in the largest one-day decline in more than three years.
Energy posted the largest decrease, falling 3.37 per cent in a pullback from steady gains. The November crude contract was down US$2.20 at US$70.97 per barrel.
Gold stocks rose nearly eight per cent as the price of gold hit its highest level since August as investors sought a hedge against uncertainty. The December gold contract was up US$34.20 at US$1,227.60 an ounce.
In New York, the Dow Jones industrial average was down 545.91 points to 25,052.83 after dropping more than 800 points on Wednesday. All companies were in the red for a second-straight day. The S&P 500 index was down 57.31 points to 2,728.37, while the Nasdaq composite was down 92.99 points at 7,329.06
Pashootan says the hemorrhage likely hasn’t ended. “I would not be surprised if we saw a 10 to 15 per cent correction in the market,” he said, noting that the S&P 500 had gone 74 consecutive days without any plus or minus move above one per cent.
Even sophisticated and experienced investors have become accustomed over the last decade to a pretty easy ride in equities, he said.
The Canadian dollar traded at an average of 76.70 cents US compared with an average of 76.97 cents US on Wednesday.
The November natural gas contract was down 6.2 cents at US$3.22 per mmBTU.
The December gold contract was up US$34.20 at US$1,227.60 an ounce and the December copper contract was up 2.25 cents at US$2.80 a pound. Some market highlights: • This week’s dizzying sell-offs in the financial markets have been a rude reminder that the U.S. economy is no longer relying on ultra-low interest rates to fuel growth. Borrowing costs are starting to climb for companies, homebuyers and the U.S. government — all of which could eventually dampen economic growth.
• U.S. President Donald Trump on Thursday escalated his attack on the Federal Reserve’s interest rate increases, asserting that “the Fed is out of control” and blaming it for this week’s plunge in stock prices. “It’s a correction that I think is caused by the Federal Reserve with interest rates,” Trump replied when asked by reporters in the Oval Office about the stock market swoon.
• Earnings season is about to ramp up, and investors hope another round of big numbers will pull the market out of its recent swoon. That’s what happened this spring, but many companies have already warned that profit expectations may be too high this time around.
• If Tesla CEO Elon Musk wants to return as chairman, shareholders will have to vote on it. The requirement is detailed in a court brief filed by Tesla and the Securities and Exchange Commission.