Traders work on the floor of the New York Stock Exchange (NYSE) on Sept. 29.Spencer Platt/Getty Images
Investors began another cycle of selling on Thursday as the U.S. dollar barely eased its stranglehold on currency markets, recession fears sapped stocks and bonds suffered more interest rate pain.
After a partial rebound on Wednesday, U.S. stocks fell sharply on Thursday. Canada’s TSX also was lower, although losses weren’t quite as harsh as on Wall Street thanks to modest gains in the heavyweight energy and materials sectors.
The worst hit major North American index was the Nasdaq, falling 2.8% to near its lowest level of 2022, set in mid-June.
A sell-off in U.S. Treasuries resumed as Fed officials gave no indication the U.S. central bank would moderate or change its plans to aggressively raise interest rates to bring down high inflation. The yield on U.S. benchmark 10-year notes rose 5.4 basis points to 3.761%.
Cleveland Fed President Loretta Mester said she does not see distress in U.S. financial markets that would alter the central bank’s campaign to lower inflation through rate hikes that have taken the Fed funds rate to a range of 3.0% to 3.25%.
Also Thursday, St. Louis Fed President James Bullard said rates will probably need to be “higher for longer” than markets previously anticipated and that a sharp downtown was not envisioned.
Data showed the number of Americans filing new claims for unemployment benefits fell to a five-month low last week as the labour market remains resilient despite the Fed’s aggressive interest rate hikes.
“Good news is bad news in that today’s job number again reiterates that the Fed has a long way to go,” said Phil Blancato, head of Ladenburg Thalmann Asset Management in New York. “The fear in the marketplace is that the Fed is going to push us into a very deep recession, which will cause an earnings recession, which is why the market is selling off.”
The yields on many Treasuries, which are considered virtually risk-free if held to maturity, now dwarf the S&P 500′s dividend yield, which recently stood at about 1.8%, according to Refinitiv Datastream.
The Toronto Stock Exchange’s S&P/TSX composite index ended down 207.08 points, or 1.1%, at 18,441.84, after posting on Wednesday its biggest one-day advance in more than four months.
For the month, the index was on track to fall 4.6%, while it was headed for its second straight quarterly decline.
“It’s a very fluid situation with a lot of geopolitical concerns, earnings, and interest rates,” said Brandon Michael, senior analyst at ABC Funds in Toronto. “Investors are on edge a little bit here, but we have reason to be optimistic getting into October.”
“Many investors are viewing the parabolic moves in yields and in the U.S. dollar to be unsustainable and emblematic of a blow off top,” Michael added.
The TSX consumer discretionary sector lost 2.1%, with Linamar Corp and Magna International falling 11.6% and 3.9% respectively.
Scotiabank trimmed its price targets on the two companies, saying a likely recession in 2023 and higher energy prices in Europe may lead to lower sales volumes of auto makers and component manufacturers, and pose headwinds to margins.
Technology shares in Toronto fell 2.9% as e-commerce giant Shopify Inc fell nearly 8% to post its lowest closing level since June 2019.
Canadian energy infrastructure firm Enbridge Inc said it has acquired U.S.-based renewable energy developer Tri Global Energy (TGE) for $270 million and assumed its debt. Enbridge’s shares ended 1.4% lower.
Heavily-weighted financials fell 1.1% and utilities were down 2.6%.
On Wall Street, the most traded stock in the S&P 500 was Tesla Inc, with US$20.8 billion worth of shares exchanged during the session. The shares declined 6.8%.
The S&P 500 dropped 2.11% to end the session at 3,640.47 points.
The Nasdaq declined 2.84% to 10,737.51 points, while the Dow Jones Industrial Average declined 1.54% to 29,225.61 points.
Meta Platforms ended down 3.7% after Bloomberg reported the Facebook owner froze hiring and warned employees of more downsizing to come.
CarMax Inc slumped nearly 25% after the used-car retailer missed expectations for second-quarter results, hurt by consumers cutting spending amid inflation, rising interest rates and higher car prices.
General Motors Co and Ford Motor Co fell more than 5% each.
Airline carriers and cruise operators fell on canceled or delayed trips after Hurricane Ian hit Florida’s Gulf Coast with catastrophic force.
American Airlines, United Airlines Holdings and Delta Air Lines each lost more than 2%.
Cruise ship operators Norwegian Cruise Line Holdings Ltd dropped 5.3% and Carnival Corp fell 6.8%.
The S&P 500 posted no new highs and 106 new lows; the Nasdaq recorded 14 new highs and 518 new lows.
Reuters, Globe staff
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