The Canadian stock market experienced a significant decline of over 300 points on Monday, primarily driven by losses in utility and energy stocks. Meanwhile, the US markets showed a mixed performance. The S&P/TSX composite index closed down 1.86%, while the Dow Jones industrial average was down 74.15 points at 33,433.35. The rise in US bond yields, triggered by a funding deal in the US government, was one of the key factors contributing to the market downturn. The increasing bond yields and the expectation of higher interest rates have affected equities negatively, with Canadian stocks being hit particularly hard due to their overweight exposure to energy and materials sectors.
Despite the overall decline, US technology stocks outperformed, exhibiting a peculiar market behavior. The November crude oil contract witnessed a decrease of US$1.97 at US$88.82 per barrel, and the November natural gas contract fell by nine cents at US$2.84 per mmBTU. However, Jules Boudreau, a senior economist at Mackenzie Investments, believes that the oil moves were possibly exaggerated. The TSX energy index plummeted by 2.4%, and financials experienced a decline of 1.8%. The utilities index was down by 3.7% due to the resignation of Enerflex Ltd.’s chief financial officer, resulting in a 27% drop in the company’s stock value.
Additionally, the Canadian dollar weakened, trading for 73.66 cents US, compared to 73.96 cents US on Friday. The weaker GDP numbers released last Friday have likely contributed to the pullback, as it indicates that Canada is entering a recession. This economic uncertainty has further negatively impacted the Canadian dollar. While the market decline affected various sectors, US technology stocks displayed resilience amid rising bond yields and expectations of higher interest rates. This disparity in performance between sectors calls for a closer examination of market trends and their potential long-term implications.