TORONTO — Canada's main stock index posted its largest daily loss in three months midweek to wipe away the impressive gains that started 2021.
The S&P/TSX composite index closed down 354.98 points or two per cent to 17,424.43, the lowest level since Dec. 14. The market started the year on fire, gaining 3.5 per cent in the first week.
American stock markets sustained similar losses Wednesday as the risk-off sentiment was widespread.
In New York, the Dow Jones industrial average was down 633.87 points at 30,303.17. The S&P 500 index was down 98.85 points at 3,750.77, while the Nasdaq composite was down 355.46 points at 13,270.60.
"The underlining mood in the market is largely one of caution and risk aversion today and investors are taking a breather after an extended stretch of gains, but with little in the way of a specific catalyst for the selloff," said Candice Bangsund, portfolio manager for Fiera Capital.
She said investors were taking a pause amid uncertainties to COVID-19 and its economic impact to assess high stock market valuations.
Although she doesn't share the view some have about a stock market bubble, Bangsund says the "near-term blip" could be a sign of a correction in the range of 10 per cent.
"If you look at investor sentiment (and) technicals, the rally is looking to be a bit stretched and sentiment is approaching euphoria," she said in an interview.
"These are typically the preconditions for a near-term pullback, so I wouldn't be surprised to see some profit-taking."
However, Bangsund continues to believe the longer term outlook remains extremely bright, especially later in the year.
"So any near-term weakness should be viewed as a compelling opportunity to add to equities at a more attractive price."
Nine of the 11 major sectors on the TSX were lower, led by materials, industrials, consumer discretionary and financials.
Materials lost 3.5 per cent on lower metals prices that hurt MAG Silver Corp. and Ivanhoe Mines Ltd.
The February gold contract was down US$6 at US$1,844.90 an ounce and the March copper contract was down 6.2 cents at nearly US$3.56 a pound.
Canadian National Railway shares dipped 4.7 per cent to push industrials down three per cent.
Consumer discretionary dropped 2.8 per cent as shares of auto parts makers Linamar Corp., Martinrea International Inc. and Magna International Inc. fell by 6.8, 5.5 and 4.7 per cent, respectively.
Canadian insurance companies sustained the largest declines as the heavyweight financials sector lost 1.5 per cent amid lower bond yields.
Energy swung to a late-day loss despite crude oil prices that rose following a U.S. report showing that stockpiles increased last week by the most since July.
The March crude oil contract was up 24 cents at US$52.85 per barrel and the March natural gas contract was up 6.6 cents at US$2.70 per mmBTU.
Technology was the best-performing sector of the day, rising 0.6 per cent as BlackBerry shares surged another 32.4 per cent, while Shopify Inc. lost 5.1 per cent.
The Canadian dollar traded for 78.28 cents US compared with 78.73 cents US on Tuesday.
Bangsund said the Federal Reserve decision to keep interest rates unchanged and commitment to continue buying US$120 billion of bonds a month had no impact on stock market movements.
However, she said investors are a little disappointed that the timeline for the U.S. fiscal stimulus might be pushed out to about March as Republicans oppose President Joe Biden's US$1.9 trillion proposal.
This report by The Canadian Press was first published Jan. 27, 2021.
Companies in this story: (TSX:BB, TSX:SHOP, TSX:CNQ, TSX:LNR, TSX:MRE, TSX:MG, TSX:CNR, TSX:MAG, TSX:IVN, TSX:GSPTSE, TSX:CADUSD=X)
Ross Marowits, The Canadian Press