TORONTO – North American investors endured another wild ride Monday as markets rebounded from deep declines in trading on broad-based weakness led by the energy sector.
“This is a market that just lacks conviction at the moment,” said Craig Fehr, Canadian markets strategist for Edward Jones.
“Not only is today a good example of that when we’ve seen some steep losses midday get reversed…but I think we’ve seen that show up over the past two weeks as well where two weeks ago we posted very strong gains in equities and last week gave them all back.”
The S&P/TSX composite index closed down 66.85 points to 14,728.28 after hitting a triple-digit decline to a low of 14,610.18 in earlier trading.
The consumer discretionary and energy sectors led on the downside as oil prices fell again despite last week’s decision by OPEC and Russia to cut production by 1.2 million barrels per day. The technology sector gained 1.6 per cent.
The January crude contract was down US$1.61 at US$51 per barrel and the January natural gas contract was up 5.7 cents at US$4.54 per mmBTU.
The Canadian dollar traded at an average of 74.62 cents US compared with an average of 75.19 cents US on Friday.
The February gold contract was down US$3.20 at US$1,249.40 an ounce and the March copper contract was down 3.95 cents at US$2.72 a pound.
Fehr said the market was hit early Monday with uncertainty related to Brexit, where British Prime Minister Theresa May postponed the parliamentary vote on her deal with the European Union.
Concerns about trade were raised by the release of data showing that exports from China had decelerated, raising concerns that tariff tensions between the U.S. and China would actually impair trade.
In addition, uncertainties about interest rate hikes and monetary policy hit cyclical sectors, energy, financials and technology.
But markets turned positive as Apple staged a rebound that helped the tech sector as a whole.
Fehr said there doesn’t appear to have been a clear catalyst for the shift in the market.
“In this environment that we’re in where equities have taken it on the chin over the past several weeks if not months, I think it’s reasonable to see equities rebound in some cases without a specific catalyst but instead on the premise that the concerns or the risks that have been in the spotlight lately aren’t going to stay there forever.”
In New York, the Dow Jones industrial average was up 34.31 points at 24,423.26 after being down nearly 480 points and following Friday’s loss of 558.72 points. The S&P 500 index closed up 4.64 points to 2,637.72 after hitting an eight-month low, while the Nasdaq composite was up 51.27 points at 7,020.52.
The early market declines prompted some dire forecasts, but Fehr said rumours of the death of the bull market were greatly exaggerated.
There are few signs that a recession is going to emerge next year, he said.
“But historically the combination of positive GDP growth and positive earnings growth have been more indicative of positive market returns than the end of a bull market.”
Index and currency in this story: (TSX:GSPTSE, TSX_CADUSD=X)