At midday: TSX falls to new 8-week low on hawkish Fed, lower gold prices
A Toronto Stock Exchange (TSX) logo is seen in Toronto in this file photo.
© MARK BLINCH / REUTERS
REUTERS
FEBRUARY 1, 2018
Canada's benchmark stock index fell to a new eight-week low on Thursday, on track for its fourth day of losses, as a hawkish Federal Reserve sapped demand for equities and gold prices slipped.
At 11:22 a.m. ET, the Toronto Stock Exchange's S&P/TSX composite index was down 107.94 points, or 0.68 per cent, to 15,842.14, its lowest level since Dec. 6.
Nine of the index's 10 main groups sat lower. Only information technology stocks were up for the day, sitting 2.7 per cent higher as Open Text Corp. jumped 14.6 per cent to $48.28.
Both energy and materials stocks dropped 0.7 per cent.
Financial stocks were down 0.9 per cent. Royal Bank of Canada declined 1 per cent to $104.29, while Bank of Nova Scotia dropped 1.2 per cent to $80.71.
Thomson Reuters Corp. was one of the biggest decliner for the second straight day, falling 4.1 per cent to $51.05 after some analysts cut their ratings. Rating agency Standard & Poor's also placed the company on credit watch "negative" from "stable," and Moody's Investor Service put its rating on review for a downgrade.
The company on Tuesday announced a deal to sell 55 per cent of its Financial & Risk business to Blackstone Group.
With gold prices on the decline, Oceanagold Corp. fell 3.8 per cent to $3.26, while Goldcorp Inc. was down 1.4 per cent to $17.37
U.S. stocks were lower in late morning trading on Thursday, following a string of lacklustre earnings and after the Federal Reserve raised its inflation outlook for the year.
Although the Fed kept rates unchanged, it struck a more hawkish tone than expected, no longer saying it expected price growth to stay below 2 per cent.
Equity markets are torn between buoyant economic growth and double-digit company earnings, on the one hand, and the possibility that U.S. and euro zone central banks will tighten policy faster than expected, which is pushing up bond yields.
"There are concerns that rates are moving up and inflation is firming," said Jeff Zipper, managing director for investments at Private Client Reserve at U.S. Bank.
"If inflation moves higher then the chances of a fourth rate hike go up. The market is a lot more jittery and is dissecting every piece of economic data more closely."
Currently the market has priced in three rate hikes for 2018.
A report showed weekly jobless claims unexpectedly fell, pointing to a tight labour market and strong economy.
However, non-farm productivity fell 0.1 per cent in the fourth quarter, which was the first drop since the first quarter of 2016, while unit labor costs rose 2.0 per cent in the final three months of 2017. Higher labour costs could signal faster inflation than is currently anticipated.
Another report showed U.S. factory activity slowed in January amid a fall in new orders.
The Dow Jones Industrial Average was down 50.26 points, or 0.19 per cent, at 26,099.13, the S&P 500 was down 2.77 points, or 0.09 per cent, at 2,821.04.
The Nasdaq Composite was up 7.84 points, or 0.11 per cent, at 7,419.32.
Eight of the 11 major S&P indexes were lower, with the materials index's 1.21 per-cent fall leading the decliners.
Strong fourth-quarter reports from S&P 500 companies so far have pushed up analysts' profit growth estimate to 13.7 per cent, from 12 per cent at the start of the month.
However, expectations from earnings have gone up and companies that don't do well are being punished more harshly, Mr. Zipper said.
UPS dropped 6.6 per cent after the world's largest package delivery company reported a fourth-quarter net profit that was hurt by additional costs.
Cigna, Alibaba, DowDuPont were all lower after reporting quarterly results.
PayPal fell 7.2 per cent after former parent eBay said it planned to move to a new primary payment processor.
Facebook rose 3.5 per cent after the company forecast rising ad sales, despite a dip in usage on the social media network.
Industry heavyweights Apple, Alphabet and Amazon are due to report results after the bell.
