TORONTO — Canada’s main stock index lost more than 200 points in a broad-based decline led by energy as crude prices sank, while U.S. stock markets also fell amid continued concern about the banking sector.
“The markets are in a state of high anxiety,” said Philip Petursson, chief investment strategist at IG Wealth Management.
“There’s a lot coming together all at once,” he said. “We have fears of another bank failure in the United States. You have some weaker economic data out of China on the manufacturing side that led to the fairly significant drop in crude prices … And you have the Fed meeting tomorrow, where everyone will be hanging on every single word in the statement, and out of (Jerome) Powell’s mouth.”
The S&P/TSX composite index closed down 207.54 points at 20,407.56. The TSX’s energy index plunged 4.6 per cent Tuesday, while financials were down 1.75 per cent.
In New York, the Dow Jones industrial average was down 367.17 points at 33,684.53. The S&P 500 index was down 48.29 points at 4,119.58, while the Nasdaq composite was down 132.09 points at 12,080.51.
U.S. bank stocks’ decline Tuesday was led by smaller banks with heavy exposure to uninsured deposits and commercial banks, on the heels of news that First Republic Bank will be bought by JPMorgan Chase.
Meanwhile, investors are anticipating another interest-rate increase by the Federal Reserve on Wednesday, said Petursson: “It’s all about the Fed right now.”
Investors are more or less locked on the expectation that the Fed will raise rates by a quarter of a percentage point Wednesday, he said, but they will be eager to hear the comments that come with the decision.
Many are expecting some kind of indication that the Fed intends to pause its rate hikes going forward, said Petursson. But while the market would view this positively, all the other factors swirling around mean even some good news might not be enough for markets to swing upward, he said.
Many, Petursson included, think the Fed is pushing its luck.
“I think what they’re doing now is they’re really testing the resolve of the economy. And I think it’s a dangerous game to play,” he said.
“We won’t know the full effect of that for six months. But that’s where I think a lot of the economic weakness really comes to a head towards the end of the year.”
A rally in gold provided some positive offset to market losses, noted Petursson, representing a flight to safety by investors.
The Canadian dollar traded for 73.43 cents US compared with 73.82 cents US on Monday.
The June crude contract was down US$4.00 at US$71.66 per barreland the June natural gas contract was down 10 cents at US$2.21 per mmBTU.
The June gold contract was up US$31.10 at US$2,023.30 an ounce and the July copper contract was down seven cents at US$3.86 a pound.
— With files from Associated Press
This report by The Canadian Press was first published May 2, 2023.
Companies in this story: (TSX:GSPTSE, TSX_CADUSD=X)
