TORONTO — Canada’s main stock index fell in a broad-based decline midweek before an expected Santa Claus rally to end a strong 2019, a market analyst said Wednesday.
“It feels to me like we’re going to continue to move higher into the end of the year and then we’ll see how people want to calibrate their expectations for 2020,” said Mike Archibald, Associate Portfolio Manager with AGF Investments Inc.
He sees no reason why the S&P/TSX composite index shouldn’t set new record highs in the coming days if the banks, which make up a large share of the index, gain some strength. It would join U.S. markets, which have increased by double-digits in 2019 and hit record highs.
“That should provide a little bit of fire for the S&P 500 to achieve and for the TSX to touch new highs,” he said in an interview.
The Canadian stock index closed down 43.22 points at 17,031.98 but hit an intraday high that was about 69 points from its record peak. It has gained about 19 per cent so far this year, trailing the Dow Jones industrial average which is up 21 per cent, the S&P up 27 per cent and Nasdaq up 34 per cent.
On Wednesday, the S&P 500 and Nasdaq hit record highs but the S&P streak ended at five straight day of gains.
The Dow was down 27.88 points at 28,239.28. S&P 500 index was down 1.38 points at 3,191.14, while the Nasdaq composite was up 4.37 points at 8,827.73.
U.S. markets were unaffected by the expected impeachment of U.S. President Donald Trump Wednesday night by the House of Representatives, said Archibald.
“I think the impeachment is great for television headlines but let’s be honest…the odds of the Senate moving against Trump is almost zero on my mind so I think that’s why the market has largely discounted it as a non event.”
The markets have been subject to a recalibration of expectations as the defensive positioning in 2019 is being unwound and investors seek other parts of the market that present growth opportunities, said Archibald.
The Canadian dollar traded for 76.23 cents US compared with an average of 75.99 cents US on Tuesday.
Eight of the 11 major sectors on the TSX were lower with health care losing three per cent as shares of Hexo Corp. and Aurora Cannabis Inc. fell by 8.3 and 7.5 per cent respectively. Consumer staples was down on hits endured by national grocers and Alimentation Couche-Tard Inc.
The heavyweight financials sector lost some more ground with shares of banks falling in spite of 10-year yields reaching their highest level since May.
Energy was lower even though crude oil prices have recently reached their highest level since the September attacks on Saudi Arabia facilities.
“If energy can continue to move a little bit higher here and hold above the $60 level I think you’re going to see a lot more interest in that space as you flip the calendar into 2020.”
The February crude contract was down two cents at US$60.85 per barrel and the January natural gas contract was down 3.3 cents at US$2.29 per mmBTU.
Industrials was down slightly even though shares of SNC-Lavalin Inc. closed up 19 per cent after it settled criminal charges related to work the company did in Libya Wednesday, with its construction division pleading guilty to a single count of fraud and agreeing to pay a $280-million penalty.
Materials was higher despite the February gold contract losing US$1.90 at US$1,478.70 an ounce and the March copper contract was down 0.1 of a cent at US$2.81 a pound.
This report by The Canadian Press was first published Dec. 18, 2019.
Companies in this story: (TSX:SNC, TSX:ATD.B, TSX:HEXO, TSX:ACB, TSX:GSPTSE, TSX:CADUSD=X)
Ross Marowits, The Canadian Press