Canada's main stock index fell more than 150 points on Monday, dragged down by falling oil prices and energy stocks, while the U.S. stock market The situation is mixed.
The S&P/TSX composite index closed down 152.43 points at 22,116.69.
In New York, the Dow Jones Industrial Average fell 115.29 points to 38,571.03, the S&P 500 rose 5.89 points to 5,283.40 and the Nasdaq Composite added 93.65 points to 16,828.67.
U.S. manufacturing slowed in May for the 18th time in 19 months, a new report found.
“It’s a bit of a negative for U.S. stocks, but it’s good for bonds,” said Lesley Marks, chief investment officer for equities at Mackenzie Investments.
Marks said that despite weaker data in some areas of the economy, such as manufacturing, the Fed is still paying special attention to inflation data when weighing when to start cutting interest rates.
“I think it’s fair to say that given their focus on inflation, they don’t have the data they need right now to support a rate cut,” she said.
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The latest labor force data will be released this weekend and is also an important part of the Fed's calculations.
Marks said the first-quarter earnings season is largely over, “with a lot of positive catalysts for investors.”
“So now … our main focus is on what central banks will do.”
She added that the European Central Bank also appeared ready to start cutting interest rates this week.
In Canada, markets eagerly await the Bank of Canada's interest rate decision on Wednesday.
Marks said economic data increasingly supports a rate cut starting this week, particularly last week's weaker-than-expected GDP report.
“This confirms that the Canadian economy is slowing and needs a boost from the Bank of Canada,” she said, adding that markets would be surprised if the central bank did not announce a rate cut this week.
“This clearly marks the beginning of an easing cycle for the Bank of Canada. And then everyone will be looking at what happens next.”
Marks said the Canadian and U.S. economies are slowly diverging in terms of data and subsequent expectations for rate cuts.
“The Canadian economy is facing more headwinds, while the U.S. economy is surprising in terms of growth,” she said.
Falling oil prices also weighed on the market on Monday, sending the Toronto Stock Exchange Energy Index down more than 4 percent.
Marks said the drop in production was likely due to news coming out of OPEC over the weekend, particularly signals that in 2025 OPEC+ countries will begin phasing out additional production cuts announced last year.
“This will affect the supply and demand balance of oil,” she said.
The July crude contract fell $2.77 to $74.22 a barrel, while the July natural gas contract rose 17 cents to $2.76 per 1,000 cubic feet.
The August gold contract rose $23.50 to $2,369.30 an ounce, and the July copper contract rose 7 cents to $4.67 a pound.
The Canadian dollar traded for 73.34 cents US compared with 73.33 cents US on Friday.
— Associated Press
© 2024 The Canadian Press
