TORONTO -- Stock markets in Toronto and New York settled in the red Thursday as traders took a step back from recent rallies and instead sought refuge in the safe haven of gold.
On Bay Street, the S&P/TSX composite index declined 73.08 points to 14,240.02, weighed down by falling energy, consumer staples and metals and mining stocks.
It was a similar picture on Wall Street, as the Dow Jones industrial average dropped 19.86 points at 17,985.19, while the broader S&P 500 composite index dipped 3.64 points to 2,115.48. The tech-heavy Nasdaq composite lost 16.02 points to 4,958.62.
The August gold contract rose by $10.40 to US$1272.70 an ounce.
"The shift in expectation that the (U.S. Federal Reserve) will keep rates as they are, in extraordinarily low circumstances for some time, builds up inflation expectations down the road and sends investors to gold as a hedge against inflation -- effectively a hedge against the Federal Reserve continuing to keep rates at low levels," said Scott Smith, senior market analyst at Cambridge Global Payments.
Last Friday's jobs figures in the U.S. surprised the market by coming in surprisingly weak for May. This week, Fed chair Janet Yellen played down the figures, but also hinted that the central bank has not unequivocally decided it will hike rates in June.
The Fed raised its key policy rate for the first time in nearly a decade in December and had hinted that there were several more hikes in store before the end of this year. Many traders had expected a raise to happen this month, but now many are predicting July or even September before any movement happens.
Smith said investors believe that the U.S. economy is showing signs of continued improvement, and that perhaps, the jobs figures were an anomaly.
The U.S. dollar is making back some of the ground it lost earlier this week. The loonie fell Thursday, down 0.10 of a U.S. cent at 78.66 cents US.
Smith forecasts that equities will continue to rise, even if the Fed decides to raise interest rates because investors will read that as a clear direction.
"Something that is lacking in financial markets is a lack of certainty," he said. "With the Fed being so data dependent and their message changing on every incoming data point, there is not a lot of certainty. It's been hard for corporations to make business investments, expand. That's why global growth is depressed at the moment."
In other commodities, the July crude contract was down 67 cents at US$50.56 per barrel, still near a 2016 high.
Natural gas contracts for July were up 15 cents at nearly US$2.62 per mmBTU and July copper contracts fell two cents to US$2.04 a pound.
