Markets down amid U.S. tax bill uncertainty, loonie trades higher

This is a file image of various stocks.

TORONTO -- Canada's main stock index dropped sharply from its record finish on Wednesday, as American markets also lost ground amid uncertainty that a sweeping U.S. tax bill will pass.

The S&P/TSX composite index tumbled 120.13 points to 16,016.46 in a broad-based decline that included the influential materials, financials and energy sectors.

In New York, the Dow Jones industrial average retreated 76.77 points to 24,508.66. The S&P 500 index was down 10.84 points to 2,652.01 and the Nasdaq composite index gave back 19.27 points to 6,856.53.

Indexes turned lower Thursday after U.S. Sen. Marco Rubio said he would vote against a proposed bill that would give generous tax cuts to corporations unless a U.S. child tax credit was expanded. House and Senate Republican leaders had forged an agreement Wednesday on the bill.

"That's hit the U.S. markets and it spilled over into the Canadian markets," said Kash Pashootan, CEO at First Avenue Investment Counsel in Toronto.

"This is what you see when you have a market that's over optimistic and pricing in perfection. Any hiccups along the road will cause volatility and retreat," he said.

"We had seen significant optimism, in fact certainty, priced in about tax reform in the U.S. We're now seeing rumblings and meaningful opposition present itself and so there's question marks around whether this tax reform will make it to the finish line."

Kash said the uncertainty around U.S. tax reform also put downside pressure on the greenback, giving the Canadian dollar a bit of a boost. But strengthening oil prices also played a significant role in the currency's rise, he added.

The loonie closed at an average trading of 78.09 cents US, up 0.28 of a U.S. cent, as the January crude contract advanced 44 cents to US$57.04 per barrel.

On the Canadian corporate front, shares of Bombardier Inc. (TSX:BBD.B) were down six cents, or 1.92 per cent, to $3.07. The Montreal-based transportation company expects its revenue to grow to between US$17 billion and US$17.5 billion next year -- higher than this year, but below analyst estimates.

Cenovus Energy Inc. (TSX:CVE) also saw its stock fall, down 66 cents, or 5.54 per cent, to $11.26. The Calgary-based oil producer said Thursday it's planning to cut between 500 and 700 employees and contractors by early next year as it looks to reduce costs.

In commodities, the January natural gas contract was down three cents to US$2.68 per mmBTU. The February gold contract was up US$8.50 to US$1,257.10 an ounce and the March copper contract added two cents to US$3.07 a pound.