TORONTO (CP) — North American stock markets ended the day in the red Wednesday as falling oil and other commodity prices dragged down the broader market.
Toronto’s S&P/TSX composite index fell 48.49 points to close at 13,661.82, after two days of robust increases on Canada’s main exchange.
New York indexes also ended lower despite early gains, with the Dow Jones average of 30 stocks falling 50.57 points to close at 17,867.58, while the broader S&P 500 shed 7.48 points to 2,102.31 and the Nasdaq edged down 2.65 points to 5,142.48.
Kash Pashootan, portfolio manager at First Avenue Advisory in Ottawa, a Raymond James company, said the hit that North American stocks took earlier this year was a much-needed correction to markets that had become overvalued in a prolonged bull market since the end of the 2008 financial crisis.
“The correction that we saw helped recalibrate valuations in the short term,” he said.
Although the market was down on the day, Pashootan said investor confidence remains high after the correction and he doesn’t anticipate another slide in market valuations before the end of the year.
“That correction brought investors back down to reality and reminded us that yes, there is volatility in being equity investors,” he said.
Yet Pashootan said a return to normal valuations doesn’t necessarily mean less volatility.
“Given that equities are fairly valued, the market will not be as tolerant to bad news,” he said.
On commodity markets, the December contract for benchmark crude oil lost $1.58 to end the trading day at US$46.32 a barrel, while December natural gas gained 0.9 of a penny to US$2.262 per mmBtu. December gold fell $7.90 to US$1,106.20 an ounce.
The oil-sensitive Canadian dollar lost 0.61 of a U.S. cent to 76.01 cents.
Investors are closely watching the U.S. Federal Reserve for signs that it will raise interest rates from the near-zero levels where they’ve been since 2008 at the bank’s next meeting in December.
Pashootan said he expects the Fed to raise rates in December after the central bank missed its chance to do so earlier this year. Although some expected the bank to raise the rate at its September meeting, he said such a move became difficult to justify because of the market correction and volatility in overseas markets during the summer months.
Canada’s central bank has cut its interest rate twice this year, and if the U.S. raises its rates the value of the Canadian dollar could fall further since a higher-interest greenback is more attractive to investors than a low-interest loonie. Canada’s oil-linked currency may also continue to suffer if oil prices remain low.
Fed chairwoman Janet Yellen told Congress on Wednesday that a December interest rate hike would be a “live possibility” if the economic recovery stays on track.
Peter Henderson, The Canadian Press
