North American stocks slide, loonie down

North American stocks slide, loonie down
S&P/TSX hits six-month low while U.S. stock markets suffer through second selloff day
Canada's main stock index hit a six-month low Thursday while U.S. stock markets suffered another sell-off day as investors are pricing in political and trade uncertainties they've long overlooked.

The result is they have now woken up to issues that have existed for the last six to 12 months, says Kash Pashootan, CEO and chief investment officer at First Avenue Investment Counsel Inc.

The so-called FAANG stocks – Facebook Inc., Amazon.com Inc., Apple Inc., Netflix Inc. and Alphabet Inc.s Google – have been leading the S&P 500 higher this year, raising concerns that the index was firing on a single, vulnerable cylinder. The FAANGs were natural targets for fearful investors, which is a sentiment that seems to have caught on in Canada, as well. Canadian tech stocks, a dozen names adding up to less than $90-billion in market value (or about 6 per cent of Apple Inc.s market value), arent exactly driving the market. But up until this summer, companies such as Shopify Inc. and Constellation Software Inc. were some of the best performers on the S&P/TSX Composite Index for the year. And over the past week, Canadas tech sector has fallen 6 per cent.

"The longer they shrug them off the more of a price we have to pay at some point," he said in an interview.

"When you're trying to price in uncertainties that have existed for six, 12, 18 months over four or five trading sessions, of course you're going to feel that in the markets."

Canadian oil and gas already had plenty of downward momentum before this weeks sell-off. As the energy transportation system has struggled to handle existing production, and with pipeline expansion plans bogged down by regulatory impediments, prices for Canadian crude oil have been crushed. The discount on Western Canadian Select against the main U.S. crude benchmark has widened to more than US$50 a barrel, which has some producers revisiting expansion plans. Investor sentiment has turned increasingly bearish. Since mid-July, oil and gas producers in the S&P/TSX Composite Index have fallen 15 per cent, including a 9-per-cent slump over the past five trading days.

The S&P/TSX composite index closed down 200.27 points to 15,317.13, the lowest level since April with 389 million shares traded.

Is it any surprise that the three best-performing stocks within the S&P/TSX Composite Index over the past 12 months are pot stocks? Despite crazy amounts of volatility, Canopy Growth Corp., Aurora Cannabis Inc., and Aphria Inc. have held up reasonably well during this weeks turbulence and sit atop the Canadian stock leaderboard over the past year as investors have clambered for exposure to the cannabis sector in advance of legalization. These three pot stocks have risen between 40 per cent and 65 per cent over the past three months alone. However, three pot stocks have little sway over the $2.2-trillion Canadian benchmark index.

The 1.3 per cent sell-off came a day after the TSX shed more than 330 points in the largest one-day decline in more than three years.

I would not be surprised if we saw a 10 to 15 per cent correction.- Kash Pashootan, CEO, First Avenue Investment CounselEnergy posted the largest decrease, falling 3.37 per cent in a pullback from steady gains. The November crude contract was down US$2.20 at $70.97 US per barrel.

Gold stocks rose nearly eight per cent as the price of gold hit its highest level since August as investors sought a hedge against uncertainty. The December gold contract was up $34.20 US at $1,227.60 US an ounce.

RBC Dominion Securities believes that markets are trapped between a classic risk-off downturn (where investors flee from risky assets and into the arms of safer assets) and a more dangerous twin bond/equity sell-off (where stocks and bonds both decline). Which of the two wins out should determine how long the equity sell-off lasts, Elsa Lignos, head of FX strategy at RBC Dominion Securities, said in a note.

In New York, the Dow Jones industrial average was down 545.91 points to 25,052.83 after dropping more than 800 points on Wednesday. All companies were in the red for a second-straight day. The S&P 500 index was down 57.31 points to 2,728.37, while the Nasdaq composite was down 92.99 points at 7,329.06.

Initial hopes that the stock market would stabilize after Wednesdays sharp sell-off were dashed on Thursday: U.S., Canadian, Asian and European stocks slid further, contributing to the most challenging atmosphere for stocks since February and raising questions about how long the rout will last – and how deep it will go.

"I would not be surprised if we saw a 10 to 15 per cent correction in the market," he said, noting that the S&P 500 had gone 74 consecutive days without any plus or minus move above one per cent.

Even sophisticated and experienced investors have become accustomed over the last decade to a pretty easy ride in equities, he said.

The Canadian dollar traded at an average of 76.70 cents US compared with an average of 76.97 cents US on Wednesday.

Though the retreat looks like a blip next to mostly encouraging returns in recent years, especially in the United States, it is adding up to a noteworthy decline: The S&P 500 is down a total of 6.9 per cent from its record high in late September.

The November natural gas contract was down 6.2 cents at $3.22 US per million British thermal units. 

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The December gold contract was up $34.20 US at $1,227.60 US an ounce and the December copper contract was up 2.25 cents at $2.80 US a pound.

In Canada, the S&P/TSX Composite Index fell 200.27 points or 1.3 per cent, to 15,317.13. Britains FTSE 100 fell 1.9 per cent and Japans Nikkei 225 fell 3.9 per cent.

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Canada’s main stock index hit a six-month low Thursday while U.S. stock markets suffered another selloff day as investors are pricing in political and trade uncertainties they’ve long overlooked.

If you would like to write a letter to the editor, please forward it to [email protected] Readers can also interact with The Globe on Facebook and Twitter .

The result is they have now woken up to issues that have existed for the last six to 12 months, says Kash Pashootan, CEO and chief investment officer at First Avenue Investment Counsel Inc.

An investor sits in front of displays showing stock information at a brokerage office in Beijing, China. Oct. 11, 2018.

“The longer they shrug them off the more of a price we have to pay at some point,” he said in an interview.

“When you’re trying to price in uncertainties that have existed for six, 12, 18 months over four or five trading sessions, of course you’re going to feel that in the markets.”

The S&P/TSX composite index closed down 200.27 points to 15,317.13, the lowest level since April with 389 million shares traded.

The 1.3 per cent selloff came a day after the TSX shed more than 330 points in the largest one-day decline in more than three years.

Energy posted the largest decrease, falling 3.37 per cent in a pullback from steady gains. The November crude contract was down US$2.20 at US$70.97 per barrel.

Gold stocks rose nearly eight per cent as the price of gold hit its highest level since August as investors sought a hedge against uncertainty. The December gold contract was up US$34.20 at US$1,227.60 an ounce.

In New York, the Dow Jones industrial average was down 545.91 points to 25,052.83 after dropping more than 800 points on Wednesday. All companies were in the red for a second-straight day. The S&P 500 index was down 57.31 points to 2,728.37, while the Nasdaq composite was down 92.99 points at 7,329.06

“I would not be surprised if we saw a 10 to 15 per cent correction in the market,” he said, noting that the S&P 500 had gone 74 consecutive days without any plus or minus move above one per cent.

Even sophisticated and experienced investors have become accustomed over the last decade to a pretty easy ride in equities, he said.

The Canadian dollar traded at an average of 76.70 cents US compared with an average of 76.97 cents US on Wednesday.

The December gold contract was up US$34.20 at US$1,227.60 an ounce and the December copper contract was up 2.25 cents at US$2.80 a pound.