The close: TSX slips as strong U.S. dollar weighs on heavyweights

Canada’s main stock index fell on Monday, pulled down by a strong U.S. dollar and lower commodity prices that weighed on the commodity-heavy index. The Dow also ended lower, but the S&P 500 and Nasdaq rose to new record highs thanks mostly to tech-related shares.
The S&P/TSX composite index closed down 57.67 points at 25,590.33.
The materials and energy companies, which together account for more than a quarter of the weight of the composite index, fell as a strong dollar made prices of these commodities more expensive in local currency.
Canada’s materials sector fell 0.91% owing to lower gold and copper prices while the energy index was down 0.77% on lower crude oil prices in Canadian currency.
“Overall market sentiment appeared cautious, influenced by a mix of global cues and some sectoral pressures,” said Robert Gill, senior vice president and portfolio manager at Goodreid Investment Counsel. Also, uncertainty regarding global economic conditions, including interest rate trajectories and commodity price volatility, is negatively influencing market sentiment, he said.
The health-care sector was the biggest loser of the day in Toronto with a drop of 4.37%, weighed down by Bausch Health Companies, which fell over 7%.
The TSX has had a stellar year so far with overall returns of over 22%, and it currently hovers around record high levels, led by heavyweight financials, materials and mining.
Financials, representing primarily the top six banks, accounts for close to a third of the total weight of the composite index and has gained close to 30% this year.
On Wall Street, the Dow Jones Industrial Average fell 0.29% to 44,782, the S&P 500 rose 0.24% to 6,047 and the Nasdaq Composite rose about 1% to 19,403.
The technology, communication services and consumer discretionary sectors rose about 1% each, while the rest of the S&P 500 sectors were lower. Tesla shares advanced 3.5%, with Stifel raising its price target on the stock.
U.S. data Monday showed manufacturing contracted at a moderate pace in November, with orders growing for the first time in eight months and factories facing significantly lower prices for inputs.
Investors also digested comments from Federal Reserve Governor Christopher Waller that he was inclined to cut the benchmark interest rate at the Dec. 17-18 meeting as monetary policy remained restrictive.
Investors have been expecting a quarter-point rate cut in December, but recent inflation data has raised worries that progress may have stalled.
The Fed began reducing rates in September by a half a point, following that with a quarter-point cut in November.
In stock moves, Super Micro Computer surged 28.7% after the artificial intelligence server maker began searching for a new finance chief based on recommendations by a special committee formed to review its accounting practices.
The loonie weakened by 0.3% to to 1.40 against the U.S. dollar, or 71.43 U.S. cents, but recovered some early morning losses which saw it falling by almost 0.5%.
On the domestic economic data front, Canadian manufacturing activity increased at the fastest pace in 21 months in November.
Later in the week, the spotlight will be on key November employment numbers that could dictate how far and how fast the Bank of Canada will lower interest rates.
For the Dec. 11 rate-setting meeting, traders are pricing in a 48% chance for a 50-basis point cut and a 25 basis point rate cut is fully priced in.
The focus will also be on quarterly earnings from big Canadian lenders later in the week, including results from Royal Bank of Canada, National Bank of Canada and Toronto Dominion Bank, among others.
South of the border, Friday’s U.S. monthly payrolls report could guide the Federal Reserve’s move at its policy meeting on Dec. 17-18.
Reuters, Globe staff