Canada’s main stock index fell on Friday, part of a broad-based pullback that also affected U.S. markets and saw steep losses in the tech and cryptocurrency sectors.
The Toronto trading floor’s S&P/TSX Composite Index fell 153.99 points to 20,111.38 points.
In New York, the Dow Jones Industrial Average fell 292.30 points to 33,706.74 points. The broader S&P 500 index fell 55.26 points to 4,228.48 points, while the Nasdaq Composite Index fell 260.12 points to 12,705.22.
A feeling of risk aversion affected the growth sectors. The S&P/TSX information technology index slid 3.29% during the day and losses in the mining sector also sent the materials index down 1.56%.
Cryptocurrencies fell sharply as Bitcoin lost 8.5% to $21,434, according to CoinDesk. Toronto-based cryptocurrency miner Hut 8 Mining Corp fell 14% on Friday.
The drop ended what had been a strong run for stocks over the past five weeks, although it’s still unclear if Friday’s clearing is a sign of bigger storms to come.
“It’s always better with hindsight, but we’ve had a really, really solid move over the last month and a half in the stock markets. It seems like a reasonable place for some level of consolidation here over the next few weeks,” said Mike Archibald, vice-president and portfolio manager at AGF Investments.
Markets have rallied in recent weeks as investors believed the most severe interest rate hikes by central bankers may be over, Archibald adds. It’s not clear if that’s the case, as minutes from the US Federal Reserve’s July meeting released this week show inflation is still too high and make it clear that the central bank would continue to raise inflation. interest rate.
Many analysts still expect the Fed to announce a 50 or even 75 basis point increase in September. All eyes will be on the Fed’s meeting in Jackson Hole, Wyoming, next week to see if Chairman Jerome Powell makes any comments that could indicate which direction the central bank is leaning, according to Archibald.
“We should get a bit more clarity on this over the coming week, and that should determine whether this (market pullback) is a slight pullback, or if we’re going to experience something a little more serious” , he adds.
Concerns about inflation and the health of the global economy intensified on Friday as new economic data out of Germany showed producer prices in Europe’s biggest economy saw their strongest unprecedented increase in July.
This news made investors nervous and immediately pushed German bond yields higher. North American bond yields quickly followed suit.
“We’re seeing a very solid rise in bond yields here today — up nearly 10 basis points depending on what market you’re looking at,” says Archibald. A basis point is equal to one hundredth of a percentage point.
Markets are also closely watching the impact of inflation on consumer spending. Retail sales in Canada rose 1.1% to $63.1 billion in June, boosted by higher sales at gas stations and vehicle and parts dealerships, according to Statistics Canada.
However, the federal agency added that its preliminary estimate for July suggests retail sales for that month fell 2.0%, although it warned the figure would be revised.
In the currency market, the Canadian dollar traded at 76.98 cents US, up from its average rate of 77.35 cents US the previous day.
On the New York Commodity Exchange, crude oil prices rose 33 cents US to US$90.44 per barrel, while natural gas rose 15 cents US to US$9.34 per million BTU .
The price of gold slipped US$8.30 to US$1762.90 an ounce and that of copper rose 3 cents US to US$3.66 a pound.