A sign board displays the TSX in the Richmond Adelaide Centre in the financial district in Toronto on Wednesday, September 29, 2021. THE CANADIAN PRESS/Evan Buhler

North American stock markets fall as new inflation data raises Fed expectations

North American stock markets fall as new inflation data raises Fed expectations

TORONTO — North American stock markets continued to lose ground as hot new inflation data further raised expectations that central banks, including the U.S. Federal Reserve, will speed up their withdrawal of monetary stimulus.

The U.S. reported Tuesday that wholesale prices surged by a record 9.6 per cent in November from a year earlier.

It confirmed the existence of persistent inflation in the U.S. and caused bond yields to move up.

“It’s got the market thinking that central banks such as the Fed and obviously the Bank of Canada will have to be a little bit quicker at removing stimulus,” said Michael Greenberg, portfolio manager, Franklin Templeton Investment Solutions.

“And it’s hitting some of those higher valuation sectors like tech which kind of has been really benefiting from the low-rate, very liquid environment.”

The S&P/TSX composite index ended the day down 99.88 points to 20,648.57 after hitting an intraday low of 20,613.67.

In New York, the Dow Jones industrial average was down 106.77 points at 35,544.18. The S&P 500 index was down 34.88 points at 4,634.09, while the Nasdaq composite was down 175.64 points at 15,237.64.

Technology lost 1.5 per cent as shares of Nuvei Corp. and Shopify Inc. decreased nine and 2.9 per cent, respectively.

A stronger U.S. dollar also helped to weaken commodities, which hurt the Canadian market.

The Canadian dollar traded for 77.85 cents US compared with 78.18 cents US on Monday.

Energy was the biggest laggard on the TSX, losing 1.6 per cent as crude oil prices fell, pushing Crescent Point Energy Corp. down 5.9 per cent.

The January crude oil contract was down 56 cents at US$70.73 per barrel and the January natural gas contract was down 4.7 cents at nearly US$3.75 per mmBTU.

Oil prices have fallen on concerns that the spreading of the new COVID-19 variant will slow down the economic reopening and maybe reverse some steps, Greenberg said.

He pointed to some companies putting return-to-work plans on hold and some travel plans being cancelled heading into the important holiday season.

“We’re in that one step back phase I think right now and that’s just probably hitting expectations as far as demand for energy.”

Materials was also lower as metals prices decreased.

The February gold contract was down US$16 at US$1,772.30 an ounce and the March copper contract was down 2.7 cents at almost US$4.26 a pound.

Three sectors were up on the day, led by industrials, consumer staples and utilities.

Industrials increased with shares of Canadian Pacific Railway Ltd. up 3.6 per cent after it closed a US$31-billion takeover of Kansas City Southern that is now subject to U.S. regulatory approval.

Market movements came ahead of the federal government’s release of its fiscal update.

Greenberg said he didn’t believe that anticipation for the mini-budget would have affected the Toronto stock market.

“I’m still a believer that although domestic and micro factors obviously have an effect on our market, we’re fairly beholden to global factors that are at play. So I think to be honest, the bigger driver is kind of emanating out of the U.S. with inflation and what’s going on potentially with the Fed tomorrow.”

Greenberg expects the Fed will accelerate its tapering of bond purchases to give it an opportunity to raise interest rates sooner if required.

This report by The Canadian Press was first published Dec. 14, 2021.

Companies in this story: (TSX:CPG, TSX:NVEI, TSX:SHOP, TSX:CP, TSX:GSPTSE, TSX:CADUSD=X)

Ross Marowits, The Canadian Press