TORONTO — A drop in the energy and materials sectors prompted by a COVID lockdown in China's financial capital pushed Canada's main stock index slightly lower to start the final trading week of the first quarter.
"The market is probably due for a pause after two weeks of rising markets," said Vincent Tonietto, portfolio manager of Fiduciary Trust Canada.
The S&P/TSX composite index closed down 28.11 points to 21,977.83 after hitting an intraday low of 21,871.62.
In New York, the Dow Jones industrial average was up 94.65 points at 34,955.89. The S&P 500 index was up 32.46 points at 4,575.52, while the Nasdaq composite was up 185.60 points at 14,354.90.
The Toronto market is up more than four per cent year-to-date, while the three major U.S. indexes are up between six and 14 per cent each since March 11.
The main spark for Monday's softness was a lockdown in Shanghai following a surge in COVID-19 infections. A brief inversion of the five and 30-year bond yields, in which the short-term rate exceeded the longer-term bonds, also raised concerns.
The energy sector fell 2.4 per cent as crude oil prices dropped seven per cent on worries about the potential of reduced demand from the world's second-largest economy.
"It also reminds people that the pandemic is not over yet ... It's maybe less on the top of the headlines of news but it's still there, so it remains a risk," Tonietto said in an interview.
The May crude oil contract was down US$7.94 at US$105.96 per barrel and the May natural gas contract was down 7.3 cents at US$5.54 per mmBTU.
Shares of Vermilion Energy Inc. lost 6.9 per cent after it announced a deal to acquire Leucrotta Exploration Inc. for $477 million. Meg Energy Corp. was 4.5 per cent lower.
The Canadian dollar traded for 79.41 cents US compared with 79.99 cents US on Friday.
The expected start of peace talks between Russia and Ukraine Tuesday in Turkey may have also added to the relief in crude prices on hopes of a breakthrough to end the one-month war.
"It's probably also why the market is not taking too badly the news on the lockdown and the inversion of the yield curve," said Tonietto.
Materials, which includes precious and base metals miners and fertilizer companies, decreased 1.5 per cent.
The April gold contract was down US$14.40 at US$1,939.80 an ounce and the May copper contract was up 2.7 cents at nearly US$4.73 a pound.
Health care was the biggest laggard on the day, losing 4.1 per cent as Canopy Growth Corp. and Aurora Cannabis Inc. and lost 8.3 and 8.2 per cent, respectively, in a reverse of recent gains prompted by an impending U.S. bill to approve the federal legalization of the drug.
Technology led the TSX, rising on a 6.3 per cent gain by Hut 8 Mining Corp. and 3.8 per cent increase for Shopify Inc. Technology has climbed after having taken a beating for a couple of months.
A highly volatile first quarter ends Thursday but the prospect of continued strong movements remains for quite some time because of geopolitical risks, economic news and central bank interest rate hikes to fight inflation, said Tonietto.
He said investors are waiting for a catalyst; either that the economy is strong enough to sustain the rise in interest rates or that central banks will tighten too much and cause an recession.
"So I guess the next question, or what the investor will have in mind going forward is, will the two year (bonds) and 10 years invert and would it be a signal for a recession."
This report by The Canadian Press was first published March 28, 2022.
Companies in this story: (TSX:VET, TSX:MEG, TSX:ACB, TSX:WEED, TSX:SHOP, TSX:HUT, TSX:GSPTSE, TSX:CADUSD=X)
Ross Marowits, The Canadian Press
