TSX skids as relief rally sputters
The Toronto stock market posted a triple-digit loss Monday, unable to sustain last week’s late rally as oil prices again faltered in the face of a global supply glut.
The Toronto Stock Exchange’s S&P/TSX index ended the day down 246.42 points at 12,143.16, after Canada’s main market added almost 550 points on the final two days of trading last week.
The energy subsector of the TSX had the biggest decline on the day, falling nearly 5.1 per cent as the price of oil turned lower after jumping above $32 a barrel on Friday.
In New York, the Dow Jones industrial average fell 208.29 points to close at 15,885.22, while the broader S&P 500 fell 29.82 points to 1,877.08 and the Nasdaq lost 72.69 points to 4,518.49.
“I think what we’re getting is really volatility in its purest form,” said Craig Fehr, Canadian market strategist at Edward Jones in St. Louis, Mo.
Fehr said the up-and-down market is a new normal after years of overinflated returns buoyed by monetary policy stimulus from central banks around the world.
As the U.S. Federal Reserve has stepped back from stimulus and begun to raise interest rates, he said, the direction of the market is much less clear.
“In this current environment, we don’t have a tremendous amount of conviction one way or another in the marketplace,” he said.
The March contract for benchmark North American crude fell $1.85 to settle at $30.34 (U.S.) a barrel after Iraq’s oil ministry said the country produced a record amount of oil in December and that it may raise its output even further in the coming year.
Fehr said the more than 18-month slide in the price of oil has made investors focus intently on any and all relevant data.
“It goes to show just how granular the market is getting at this point when every incremental piece of news on production for oil or demand for oil is driving these pretty wide swings,” he said.
That, in turn, drives a “herd mentality” in the marketplace, Fehr said.
In other commodities, March natural gas rose1.4 cents to settle at $2.155 per mmBtu and February gold added $9 to end at $1,106.20 a troy ounce.
The commodity-sensitive Canadian dollar broke a three-day string of gains as it lost 0.59 of a cent (U.S.) to settle at 70.08 cents.
Fehr said the outlook for the loonie is a little brighter after the Bank of Canada announced Jan. 19 that it would leave its benchmark interest rate unchanged.
“The chances of us finding a floor, some stabilization in oil prices and the loonie, is more likely now than perhaps . . . (it has been) over the last year or so,” he said.