TSX falls as base metals and health care drop

Canada’s main stock index closed lower as weakness in base metals and cannabis companies offset gains in the financials and consumer discretionary sectors on Monday.

The S&P/TSX composite index was down 26.75 points at 19201.28 after posting a record-high close of 19228.87 last Thursday.

In New York, the Dow Jones industrial average was down 55.20 points at 33745.40.

The S&P 500 index fell 0.81 points at 4127.99, while the Nasdaq composite was down 50.19 points at 13850.00.

“We’re seeing rather modest moves to the downside today and a flat market, effectively, in Canada,” said Craig Fehr, investment strategist with Edward Jones.

“I think it’s broadly a reflection of the markets sitting in a holding pattern today ahead of some impactful data later this week as earnings season kicks off with the big U.S. banks, as well as some inflation readings.”

Investors are continuing to focus on the economic recovery as well as concerns about inflation and rising bond yields. JPMorgan Chase and Wells Fargo report quarterly results on Wednesday, while Bank of America and Citigroup report on Thursday.

Meanwhile, the U.S. consumer price index for March is to be released on Tuesday.

“We’ve seen a pattern over the past few weeks of equities rallying to new highs and then taking a breather and I think today qualifies as one of those days where equities are taking a breather,” said Fehr.

A sign of investor unrest was seen in market reaction to first-quarter results from Canadian cannabis company Aphria Inc., which closed down $2.89, or 14.19 per cent, to $17.47.

Aphria blamed pandemic lockdowns as it reported a $361-million loss compared with a profit of $5.7 million in the same quarter a year earlier. It noted an adjusted loss of $47.9 million or 15 cents per share for the quarter compared with an adjusted loss of $9.8 million or four cents per share in the same quarter last year.

Other cannabis companies also lost ground as the health-care sector fell 5.61 per cent.

Fehr doesn’t cover Aphria but said markets are watching closely for disappointing results.

“I would suspect that as we advance this year, companies that are trading at very high valuation multiples that are already pricing in really good results are likely to be punished if they come up short of those expectations,” he said.

“That might add a little bit of volatility in the market.”

Canadian markets are still being buoyed by Statistics Canada’s report Friday that 303,000 jobs were added in March and the unemployment rate fell to 7.5 per cent, Fehr said.

The Canadian dollar traded for 79.66 cents US on Monday compared with 79.72 cents US on Friday.

Financials staged a broad rise Monday, led by Manulife Financial, up 1.67 per cent to $27.47, while the boost in the consumer discretionary sector was led by Canadian Tire Corp., up 1.81 per cent to $186.77, and Spin Master Corp., up 1.79 per cent to $38.17.

The May crude oil contract was up 38 cents at $59.70 US per barrel, and the May natural gas contract rose three cents to $2.56 US per mmBTU.

An energy sector slide of 0.27 per cent was broad-based but led by Arc Resources Ltd. and Meg Energy Corp. with 3.01 and 2.77 per cent declines in stock price.

The June gold contract was down $12.10 US at $1,732.70 US an ounce and the May copper contract was down two cents at $4.02 US a pound.