TORONTO — Canada’s main stock index fared better than its U.S. counterparts Tuesday even as the technology pullback carried over into a second week of trading.
The S&P/TSX composite index closed down 118.49 points or 0.73 per cent to 16,099.52. Markets were closed Monday for Labour Day.
In New York, the Dow Jones industrial average was down 632.42 points or 2.25 per cent at 27,500.89. The S&P 500 index was down 95.12 points at 3,331.84, while the Nasdaq composite was down 465.44 points or 4.11 per cent at 10,847.69.
“It is as if everyone has come back from Labour Day weekend and is really focused on all of these risks,” said Catharine Sterritt, portfolio manager, equities for CIBC Asset Management.
She pointed to uncertainty about how bad a second wave of COVID-19 infection is going to be, how the economic restart is going to materialize and the results of the U.S. election. In the U.S., there’s also uncertainty about another fiscal stimulus package and whether it will be large enough.
The overheated technology sector has absorbed the biggest hit over the last three trading sessions with Nasdaq down 10 per cent and Canada’s tech sector off 8.5 per cent after losing 1.6 per cent Tuesday.
Sterritt believes the sector could face another 10 per cent decline.
“These names they’ve just had massive moves if you measure where they’ve come since April,” she said in an interview. “Ten per cent down from here still has these stocks up 50-60 per cent across the board, not even looking at the major majors like a Shopify Inc.”
She said investors have been using large blue chip tech names “as a place to hide, post-pandemic.” They performed best in the downturn, came back quickest in April and have seen tremendous flow of funds as investors parked for safety.
Despite the recent correction, Sterritt likes tech longer term. The global pandemic has accelerated the transition to the digital economy and to e-commerce.
“So we think that this has still got multiple years to run,” she said.
But she said Tuesday’s down day was a time to stand back and wait for buying opportunities that will come especially as companies are poised for mergers and acquisitions.
Seven of the 11 major sectors on the TSX were lower, led by energy.
It plunged 7.6 per cent with MEG Energy Corp. down 11.9 per cent, Vermilion Energy Inc. off 11 per cent and Suncor Energy Inc. down 8.5 per cent with 31.8 million shares traded.
The decreases flowed from lower energy prices because of demand concerns with the October crude contract down US$3.01 at US$36.76 per barrel and the October natural gas contract off 18.8 cents at US$2.40 per mmBTU.
The Canadian dollar traded for 75.81 cents US compared with 76.40 cents US on Friday.
Health care slipped as Aurora Cannabis Inc. shares dropped 10.6 per cent as the company announced a new CEO and up to $1.8 billion of goodwill impairment charges.
Materials rose half a per cent on higher gold prices.
The December gold contract was up US$8.90 at US$1,943.20 an ounce and the December copper contract was down 3.7 cents at US$3.02 a pound.
This report by The Canadian Press was first published Sept. 8, 2020.
Companies in this story: (TSX:MEG, TSX:VET, TSX:SU, TSX:SHOP, TSX:ACB, TSX:GSPTSE, TSX:CADUSD