S&P/TSX composite falls despite commodities, loonie hits highest level since 2017
Published Thursday, May 6, 2021 3:31AM EDT Last Updated Thursday, May 6, 2021 5:28PM EDT
TORONTO -- Canada's main stock index slipped despite positive moves by the commodities sectors while the loonie hit its highest level in more than three years.
The Canadian dollar topped 82 cents US for the first time since September 2017, but slipped just below that threshold as stock markets closed. It traded for 81.97 cents US compared with 81.49 cents US on Wednesday.
The currency received a boost after the last Bank of Canada meeting in which the central bank indicated it would begin tapering of bond-buying.
There was no specific catalyst for Thursday's move higher but the loonie has been correlated to the S&P 500, which gained on the day, said Erik Bregar, head of currency strategy at the Exchange Bank of Canada.
“I think we've seen just enough of a buoyant sentiment in stocks to keep the Canadian dollar close to its session highs,” he said in an interview.
The S&P/TSX composite index closed down 19.76 points to 19,290.98 after hitting an intraday low of 19,181.87.
In New York, the Dow Jones industrial average was up 318.19 points to a record close of 34,548.53. The S&P 500 index was up 34.03 points at 4,201.62, while the Nasdaq composite was up 50.41 points at 13,632.84.
“That sort of steady to higher sentiment for stocks is enough to keep the Canadian dollar still bid here towards the end of the day,” Bregar added.
Trading climbed to start the day after the U.S. jobless benefit claims declined last week to 498,000, the lowest level of the pandemic.
Investors are watching for Friday's jobless numbers in Canada and the U.S. for a signal on how the economic recovery is progressing.
U.S. estimates vary widely.
“That's why I think it could be the next inflection point for the market,” Bregar added.
Market sentiment shifted after Dallas Federal Reserve CEO Robert Kaplan said he would like to consider discussing the tapering of bond-buying “sooner rather than later.”
Bregar said it was a “bit of a hawkish tone” that is counter to chairman Jerome Powell's stated narrative.
But it seemed to concur with Treasury Secretary Janet Yellen's comments Tuesday that interest rates should rise to prevent the economy from overheating. She later walked those back saying they weren't meant to be a prediction.
Materials and energy were the strongest sectors on the TSX.
The sector that includes metals, forestry and fertilizer companies gained 1.9 per cent as gold increased above the psychological threshold of US$1,800 an ounce and copper again set new decade highs.
The June gold contract was up US$31.40 at US$1,815.70 an ounce and the July copper contract was up 7.85 cents at US$4.60 a pound.
Endeavour Silver Corp. shares gained 10 per cent, SSR Mining Inc. was up 8.1 per cent and New Gold Inc. rose 5.7 per cent on the day.
Energy increased by nearly one per cent even though crude oil prices dropped, with shares of Arc Resources Ltd. up 8.5 per cent.
The June crude contract was down 92 cents at US$64.71 per barrel and the June natural gas contract was down one cent at US$2.93 per mmBTU.
Health care and technology were the big laggards. Shares of Organigram Holdings Inc. and Aphria Inc. slumped 7.2 per cent and 5.6 per cent, respectively, to push health care down 5.1 per cent on the day.
Technology was off 1.6 per cent with Lightspeed POS Inc. down 5.1 per cent and Shopify Inc. 3.8 per cent lower.
This report by The Canadian Press was first published May 6, 2021.