S&P/TSX composite dragged lower by financials Tuesday, U.S. stock markets mixed

TORONTO — Losses in the financial sector dragged Canada's main stock index lower Tuesday, while U.S. markets were mixed.

Rising bond yields in Canada and the U.S. continue to be the overarching story in August, said Giles Marshall, senior vice-president and portfolio manager at Fiduciary Trust Canada.

“One of the main reasons you've seen weakness in equity markets month to date has been the fact that you've seen a significant rise in bond yields,” he said.

The S&P/TSX composite index closed down 93.66 points at 19,691.21.

In New York, the Dow Jones industrial average was down 174.86 points at 34,288.83. The S&P 500 index was down 12.22 points at 4,387.55, while the Nasdaq composite was up 8.28 points at 13,505.87.

Bond yields have been rising on increasing expectations that interest rates will remain higher for longer as recent economic data has proven surprisingly strong, said Marshall. Central banks have to remain vigilant as they seek to bring down the last bit of stubborn inflation, he said.

“The final mile, getting from three per cent down to the two per cent target, is going to prove to be quite difficult,” he said.

Meanwhile, it was a slow day for equities and earnings as investors await big news later in the week, said Marshall.

Chipmaking giant Nvidia Corp., which blew expectations out of the water last earnings season and helped fuel the artificial-intelligence rally of 2023’s first half, is set to report after the bell Wednesday.

It will be difficult for the company to beat expectations at the scale it did earlier this year, as the bar is quite high for this next report amid this year’s hype over AI, said Marshall.

Financials overall were lower Tuesday following some ratings downgrades for several U.S. banks, he said.

Earnings season for the Canadian banks is set to kick off Thursday, starting with TD and RBC. There are expectations that banks will need to set aside further provisions for bad loans, said Marshall.

And on Friday, U.S. Federal Reserve chairman Jerome Powell will speak at the central bank’s annual economic symposium in Jackson Hole.

“Last year, he made some surprisingly hawkish comments, and the market didn’t like it at all, so I’m sure he won’t want to repeat that this year,” said Marshall.

“He’s got to sort of thread the needle and be careful, I think, in terms of what he says.”

The Canadian dollar traded for 73.81 cents UScompared with 73.84 cents US on Monday.

The October crude contract was down 48 cents at US$79.64 per barrel and the September natural gas contract was down seven cents at US$2.56 per mmBTU.

The December gold contract was up US$3.00 at US$1,926 an ounce and the September copper contract was up four cents at US$3.76 a pound.

This report by The Canadian Press was first published Aug. 22, 2023.

Companies in this story: (TSX:GSPTSE, TSX:CADUSD=X)

Rosa Saba, The Canadian Press