TORONTO — A rare sizable decline in crude oil prices overwhelmed a tech bounce to push Canada’s main stock index lower, ending a brutal week that saw it plunge 6.6 per cent in its worst performance in more than two years.
Crude oil prices dropped more than six per cent Friday to fall to a four-week low on recession concerns and a strong U.S. dollar.
The August crude contract was down US$7.26 at US$107.99 per barrel and the July natural gas contract was down 52 cents at US$6.94 per mmBTU.
The energy sector fell 5.7 per cent with shares of Vermilion Energy Inc. leading the decline by losing 8.6 per cent.
“It is the only sector that hasn’t taken it on the chin lately and because of that people that were getting margin calls often will sell their winners because they don’t have enough capital left in their losers,” said Colin Cieszynski, chief market strategist at SIA Wealth Management.
Meanwhile, technology was one of the sector leaders, gaining 2.2 per cent as Lightspeed Commerce Inc. rose 7.1 per cent and Shopify Inc. was 4.6 per cent higher.
Bond yields softened, which supported the tech gains.
“In a way we’re getting a bit of a reversal, so we had tech —that had been hit really, really hard — bouncing back and energy, which had been outperforming, is having a tough day. So almost a bit of a kind of a mean reversal on both sides,” he said in an interview.
The Canadian dollar traded for 76.72 cents US compared with 77.35 cents US on Thursday.
Utilities and materials were also lower as metals prices declined on the stronger U.S. greenback.
The August gold contract was down US$9.30 at US$1,840.60 an ounce and the July copper contract was down 9.5 cents at US$4.01 a pound.
“We’re just seeing a general rotation of capital into the United States in a flight to quality or a flight to safety and that even can swamp gold. And certainly oil isn’t helping on the Canadian dollar side,” Cieszynski said.
Aurora Cannabis Inc. increased 6.9 per cent to help push the health care sector up 2.6 per cent.
Consumer discretionary, real estate and telecommunications were each up while industrials rose with Air Canada shares climbing 4.7 per cent.
Overall, the S&P/TSX composite index closed down 73.58 points to 18,930.48 in a daily swing of more than 400 points.
In New York, the Dow Jones industrial average was down 38.29 points at 29,888.78. The S&P 500 index was up 8.07 points at 3,674.84, while the Nasdaq composite was up 152.25 points at 10,798.35.
North American stock markets listed between gains and losses on the day as they ended a “roller-coaster” week that saw huge fluctuations and swings in sentiment before and after the U.S. Federal Reserve hiked interest rates by the largest amount since 1994.
Adding to the volatility is the so-called quadruple witching hour with the once-per-quarter simultaneous expiration of stock index futures, stock options and stock index options.
Contributing to the movements are investor fears the U.S. economy is heading to recession after being negative in the first quarter and teetering closer and closer to zero growth in the second quarter.
“So it may not be a big decline this quarter, but this could be one of those just make, just miss,” Cieszynski said. “Maybe we don’t end up with something going off the cliff, but maybe we have a few quarters where we sit around zero growth, another more rare definition of a recession.”
He anticipates that market volatility will calm next week because there are no central bank meetings and not much economic news expected.
“Summer is approaching so it’s hard to say whether we just see continued selling or we see any kind of bargain hunting come out of this after the declines we’ve had.”
This report by The Canadian Press was first published June 17, 2022.
Companies in this story: (TSX:VET, TSX:LSPD, TSX:SHOP, TSX:ACB, TSX:AC, TSX:GSPTSE, TSX_CADUSD=X)
