Stocks fall as gold continues to shine

North American stock markets closed in the red Thursday as gold prices soared, edging closer to an all-time high.

“There’s an enormous momentum rollover happening,” said Mike Archibald, vice-president and portfolio manager with AGF Investments Inc.

The S&P/TSX composite index dropped by 152.41 points to 16018.65.

In New York, the Dow Jones industrial average shed 353.51 points to 26652.33. The S&P 500 index fell 40.36 points to 3235.66 while the Nasdaq composite lost 244.71 points to 10461.42.

He pointed to Microsoft Corp. and Tesla Inc. shares, which dropped 4.35 per cent and 4.98 per cent on the Nasdaq, despite strong earnings reports after markets closed Wednesday.

“That speaks to the idea that there has been high expectations for some stocks, particularly in the tech sector, and now we’re getting a better sense of where things lie,” Archibald said.

The rollover in those names is having a significant effect on other momentum trades, he said, pointing to broader weakness in the Canadian and U.S. technology sectors.

Shopify Inc., for example, dropped $37.94, or 2.96 per cent, to $1,244.46 on the Toronto Stock Exchange.

“I think it’s some profit-taking,” Archibald said of the drops in that sector, as well as uncertainty as to whether these companies can continue to put up the same types of numbers going forward.

Some of the broader market weakness may also come from negative economic data south of the border, Archibald said.

The U.S. Labor Department reported more than 1.4 million people applied for jobless benefits last week, up from 1.3 million the previous week for the first increase since March.

“Which would put a little bit of cold water on this idea that the economic restart is gaining traction,” Archibald said.

The materials sector on the TSX, which includes gold, also performed poorly with stocks shedding on average 1.80 per cent of their worth, despite rising commodity prices.

The August gold contract advanced $24.90 to $1,890.00 US an ounce — a nineyear high. It moved closer to its record high of over $1,900 an ounce set in 2011.

Typically, a noticeable divergence in the price of a commodity and the price performance of stocks in that sector are due to the commodity price moving too far, too fast, Archibald said, or the share prices having performed well and being a bit tired.

Ongoing weakness in the U.S. dollar could have a negative impact on commodity prices, he said. The Canadian dollar traded for 74.67 U.S. cents compared with 74.52 U.S. cents from Wednesday.

Two of Canada’s major grocers boosted the consumer staples sector on the TSX, said Archibald, highlighting Loblaw Companies Ltd. and Empire Co.

Loblaw shares rose $1.04, or 1.52 per cent, to $69.46 after the company released its second-quarter earnings that outperformed analyst expectations.

Empire’s shares, meanwhile, jumped nearly six per cent, or $1.97, to $35.50 the day after it announced a new three-year strategic plan that would see it invest $2.1 billion over three years.

Elsewhere in commodities, the September crude contract fell 83 cents to $41.07 US per barrel and the September natural gas contract gained 11.7 cents to nearly $1.83 US per mmBTU. The September copper contract rose 1.4 cents to about $2.94 US a pound.