Canada’s main stock index dropped on Friday as the price of oil stayed below US$70 a barrel and losses in the base metal and battery metal stocks weighed on the Toronto market.
The S&P/TSX composite index was down 162.67 points at 19,418.23.
In New York, the Dow Jones industrial average was down 219.28 points at 33,727.43. The S&P 500 index was down 33.56 points at 4,348.33, while the Nasdaq composite was down 138.09 points at 13,492.52.
Allan Small, senior investment adviser at iA Private Wealth, said the tone of the markets shifted earlier this month after U.S. Federal Reserve chairman Jerome Powell said two more rate hikes south of the border are expected.
“That really turned the markets from being more of a positive trend to obviously a negative trend and this looks like the first negative week in many, especially for the NASDAQ. So I think what you’re seeing is the markets starting to factor in possibly another 50 basis points of interest rate hikes,” he said.
“Right now, the markets are being set back by this threat of higher interest rates to come.”
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He said that doesn’t bode well for the TSX in particular, which is very commodities-driven.
“The fear for the TSX is a lot of energy, a lot of commodities, a lot of materials,” said Small.
“If interest rates continue to rise, the predictions or the calls for a further slowdown in the economy could come true. We could continue to see a slowdown and perhaps even a mild recession if the central banks continue to do what they’re doing. So I think that is obviously a negative for commodities.”
Small said the tech sector is also one to watch, especially in the context of rising interest rates.
He said technology stocks drove the market rally for the first half of the year, but have been falling over the past few days.
“If you surprise the market, and I think the Fed did by ? the fact that they had a hawkish tone saying that they definitely see another few interest rate hikes to come by the end of the year, that is a big negative for technology,” said Small.
The Canadian dollar traded for 75.76 cents US compared with 75.99 cents US on Thursday.
The August crude oil contract was down 35 cents at US$69.16 per barrel and the August natural gas contract was up 14 cents at US$2.84 per mmBTU.
The August gold contract was up US$5.90 at US$1,929.60 an ounce and the July copper contract was down nine cents at US$3.80 a pound.
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