TSX closes lower and US stock markets advance

(Toronto) The main Canadian stock index fell again on Tuesday, weighed down by the drop in oil prices, while American stock markets rose.

The S&P/TSX Composite Index closed down 30.20 points at 24,072.51.

In New York, the Dow Jones industrial average rose 126.13 points to 42,080.37. The S&P 500 index advanced 55.19 points to 5,751.13, while the NASDAQ Composite Index gained 259.01 points to 18,182.92.

While U.S. markets were boosted by big tech companies, which outperformed other sectors on Tuesday, the TSX was dragged down by Canadian oil and gas stocks.

Canada’s main stock market is heavily weighted by energy stocks, so its fortunes are closely tied to global oil prices. While oil has surged recently on concerns that escalating tensions in the Middle East could spread across the region, it gave back some of its gains on Tuesday.

A barrel of Brent crude, the international standard, fell 4.6% to $77.18, recording its first loss in a week and a half. The barrel of benchmark American crude, meanwhile, fell 4.6% to US$73.57.

The energy sector was the biggest loser of the day, with the S&P capped energy index falling 2.33%.

“There’s obviously a lot of geopolitical risk that’s been priced into oil prices, and obviously with the Canadian market being so heavily focused on energy, that’s had a huge influence,” said Michael Greenberg, head of management. portfolio manager for the Americas at Franklin Templeton.

“Today, I suppose the trend seen in recent weeks, where Canadian stocks were outperforming those in the United States, has reversed somewhat,” he added.

One of the biggest fears that have driven up oil prices since last week, when the Israeli military said Iran had fired missiles at the country, was that Iran could cut off oil deliveries through the Strait of Hormuz, through which a quarter of the world’s oil supply passes.

That hasn’t happened, and the fact that oil continues to flow freely through the region has somewhat dampened last week’s rally in crude prices.

But Mr. Greenberg stressed that a lot of uncertainty still plagues the markets at the moment.

“‘Agitated’ is certainly a good description. I think the flow of information definitely makes things happen pretty quickly. And that makes positioning portfolios a little more difficult in the short term, he said. There is a very wide distribution of potential outcomes. »

He added that good portfolio managers will try to see beyond short-term geopolitical volatility and look at longer-term fundamentals. These include supply and demand dynamics in the oil market, but also factors like China’s economic recovery attempts and the trajectory of central banks’ interest rate decisions.

South of the border, a series of reports shows the U.S. economy remains healthier than expected, forcing investors to lower their expectations for how much the U.S. interest rate will fall. Federal Reserve at its next meeting.

Although investors don’t want the economy to tip into recession, they want to see central banks continue to cut interest rates, as high interest rates weigh on company performance and stock prices.

Greenberg said he would also be monitoring the latest monthly employment and unemployment data from Statistics Canada, due to be released Friday, as it could impact the Bank of Canada’s next decision.

“I think the trajectory is pretty certain, in the sense that many major central banks are looking to lower interest rates from current levels,” he said. But the big unknown really is how quickly they’ll be able to get there. »

On the currency market, the Canadian dollar traded at 73.22 US cents on Tuesday compared to 73.48 US cents on Monday.

On the New York Commodity Exchange, the price of natural gas fell by two cents to $2.73 per million BTU.

Gold was down $30.60 at $2,635.40 an ounce and copper was down 11 cents at $4.46 a pound.