TORONTO — North American stock markets fell sharply as investors girded for Friday’s inflation numbers in the U.S. ahead of an expected Federal Reserve rate hike next week.
“It seems like everybody is just waiting for the inflation report tomorrow, so they’re either doing nothing or they’re selling and it seems to be getting worse as we speak here,” said Michael Currie, vice-president and investment adviser at TD Wealth, before markets slumped into the close.
The S&P/TSX composite index ended the day down 228.54 points to 20,563.89.
In New York, the Dow Jones industrial average was down 638.11 points at 32,272.79. The S&P 500 index was down 97.95 points at 4,017.82, while the Nasdaq composite was down 332.04 points or 2.8 per cent at 11,754.23.
Currie said investors are worried May’s inflation numbers will be worse than people are expecting.
“The concern is that if inflation is higher, that means rates are going higher. That means bond yields are going higher, which is of course bad for gold and then generally it’s bad for the stock market too,” he said in an interview.
Even if inflation stays flat, he said, that will be perceived as negative because people are hoping for at least a little of a downtick at some point.
Observers are expecting the Fed will hike rates by 50 basis points next week and again in July in a bid to wrestle down inflation. But the risk is the central bank will go too far and spur a recession.
The European Central Bank reinforced the global move to increase interest rates when it said it would raise rates next month for the first time in more than a decade and proceed with possibly a larger hike in September.
“We kind of knew it was coming, but now it’s official and they’re putting a number and the time frame on it, so that’s definitely a negative for gold, which is down today on that,” Currie said.
The price of the precious metal fell, along with copper as shares of HudBay Minerals Inc. lost 6.6 per cent.
The August gold contract was down US$3.70 at US$1,852.80 an ounce and the July copper contract was down 7.4 cents at US$4.38 a pound.
Utilities was the only sector that ended the day higher on the TSX as a broad correction swept through 10 sectors, of which seven fell by at least one per cent.
Health care decreased 3.7 per cent as shares of Canopy Growth Corp. and Tilray Inc. were each down nearly six per cent.
Technology, financials and real estate were off 1.2 per cent, followed by consumer discretionary and energy. Technology was weaker as 10-year Treasury bond yields were above three per cent. Hut 8 Mining Corp. lost seven per cent, while Lightspeed Commerce Inc. and Shopify Inc. were 4.5 and four per cent lower.
Energy lost ground as crude oil prices fell from a three-month high on concerns that demand will be hampered by new COVID lockdowns in Shanghai.
The July crude contract was down 60 cents at US$121.51 per barrel and the July natural gas contract was up 26.4 cents at US$8.96 per mmBTU.
Arc Resources Ltd. and Whitecap Resources Inc. were hit the hardest, losing three and 2.5 per cent, respectively.
The Canadian dollar traded for 79.09 cents US compared with 79.74 cents US on Wednesday.
Friday’s Canadian jobless report for May will be closely watched in Canada and could affect the loonie, but the U.S. Consumer Price Index numbers are what will really drive market activity to end the week, Currie said.
“Everything is getting overshadowed by inflation.”
This report by The Canadian Press was first published June 9, 2022.
Companies in this story: (TSX:HBM, TSX:ARX, TSX:HUT, TSX:LSPD, TSX:SHOP, TSX:WCP, TSX:GSPTSE, TSX_CADUSD=X)
