Share prices drop sharply in Toronto, New York after best monthly performance in years,

TORONTO — After posting its best monthly performance in years, Canada’s main stock index started May by trending lower as investors reacted negatively to a U.S. retaliatory threat against China over COVID-19.

U.S. President Donald Trump said late Thursday that he’s going to assess retaliatory measures for the pandemic which he said came from a Chinese laboratory, citing intelligence reports.

Trump also said his trade deal with China was of secondary importance to the pandemic.

That just introduced potential downside catalysts into the minds of investors, said Macan Nia, senior investment strategist at Manulife Investment Management.

“The last thing that investors want to try to understand or deal with — on top of this health-care issue, which has led to essentially global economies around the world stopping — is now having to introduce into the formula, potential retaliation,” he said in an interview.

Nia said Friday’s market declines also resulted from investors crystallizing profits at week’s end following a strong month in which U.S. markets in particular posted their best performances in more than three decades.

The S&P/TSX composite index closed down 160.40 points at 14620.34 to mark its sixth straight week of gains.

In New York, the Dow Jones industrial average was down 622.03 points at 23723.69. The S&P 500 index was down 81.72 points at 2830.71, while the Nasdaq composite was down 284.60 points or 3.2 per cent at 8604.95.

The S&P 500 and Nasdaq were hit by a 7.7 per cent drop in the price of Amazon shares after the online retailer warned it could post its first quarterly loss in five years because of the billions of dollars it’s spending due to the coronavirus pandemic.

Ten of the 11 major sectors of the TSX were lower, with only materials gaining 3.7 per cent.

It rose with higher gold prices as the likelihood of additional monetary and fiscal stimulus is good for the precious metal.

The June gold contract was up $6.70 US at $1,700.90 US an ounce and the July copper contract was down 3.2 cents at $2.31 US a pound.

Energy led the declining sectors, losing 4.2 per cent despite a further increase in the price of crude oil. Vermilion Energy Inc. lost 8.3 per cent, MEG Energy Corp. 7.7 per cent and Cenovus Energy Inc. 6.7 per cent.

The June crude contract was up 94 cents or nearly five per cent at $19.78 US per barrel and the June natural gas contract was down 5.9 cents at $1.89 US per mmBTU.

Crude prices have been supported by a growing curtailment in output because of the low price caused by weak demand and a price war between Russia and Saudi Arabia.

Nia said oil rigs decreased in the U.S. for a seventh consecutive week as production fell to 12.2 million barrels per day.

Health care dropped 3.4 per cent with cannabis producer Cronos Group Inc. off 4.25 per cent and Bausch Health Companies Inc. down nearly 4.2 per cent.

Real estate was down 2.8 per cent, utilities 2.1 per cent and industrials nearly two per cent.

The Canadian dollar traded for 71.09 cents US compared with an average of 71.89 cents US on Thursday.

Nia expects the economic recovery will be slower than some think and will depend on the coronavirus.

“Investors, I think, are going to be a little bit impatient with the progress of that, regardless of how ahead of the curve it is,” he said.

Nia noted that countries might follow the experience of Germany, which has seen some increased infections since partially reopening its economy.

“So it’s going to be two steps forward, one and a half steps back, but the progress is forward,” he said.