TORONTO — Canada's main stock index snapped a two-day recovery on Tuesday as market volatility continued ahead of interest rate news this week from the U.S. Federal Reserve.
"We're seeing this continued stock market volatility and along with it this drop in global bond yields and I think it's just due to the ongoing concerns we're seeing in the markets," said Kevin McLachlan, portfolio manager at Fiduciary Trust Canada.
In addition to uncertainty about a trade war between the U.S. and China, there are concerns about economic growth, and the potential for a hard Brexit in October.
Bond yields moved lower again after inverting last week in a signal of a potential recession.
With no major data or tweets from U.S. President Donald Trump, investors turned their focus to two important events this week from the Fed. Minutes of the last central bank meeting will be released Wednesday and chairman Jerome Powell will speak on Friday in Jackson Hole, Wyo.
"I think those are two very important events and I think the market is waiting on both of those with a lot of anticipation," McLachlan said in an interview.
Markets are pricing in another interest rate cut next month and will be looking for signals from Powell as some, including Trump, have called for a large decrease to stimulate the economy.
"Those are two events that could really move the markets later in the week."
The S&P/TSX composite index closed down 90.74 points at 16,213.31.
In New York, the Dow Jones industrial average was down 173.35 points at 25,962.44. The S&P 500 index was down 23.14 points at 2,900.51, while the Nasdaq composite was down 54.25 points at 7,948.56.
The telecommunications sector led the TSX decrease, falling 1.46 per cent as Rogers Communications Inc. dropped 2.1 per cent a day after a federal regulator lowered wholesale broadband prices that major telecom companies can charge smaller internet providers.
The key energy sector was also lower amid ongoing concerns about the impact of slowing global economic growth on crude demand. Shares of Canadian Natural Resources were down 2.5 per cent, followed by Suncor Energy Inc. at 1.6 per cent.
The October crude contract was down one cent at US$56.13 per barrel and the September natural gas contract was up 0.8 of a cent at US$2.22 per mmBTU.
Investors will be watching as Canadian bank earnings get underway on Wednesday for any comments on bank profitability caused by an inverted yield curve.
"We haven't really seen the effect of these inverted yield curves on bank profitability yet so I guess that's a theme that we'll continue to watch," added McLachlan.
The Canadian dollar traded for an average of 75.06 cents US compared with an average of 75.20 cents US on Monday.
Materials climbed more than one per cent as the price of gold increased, pushing Barrick Gold Corp. shares 3.15 per cent higher.
The December gold contract was up US$4.10 at US$1,515.70 an ounce and the September copper contract was down 2.35 cents at US$2.58 a pound.
Companies in this story: (TSX:RCI.B, TSX:CNQ, TSX:SU, TSX:ABX, TSX:GSPTSE, TSX:CADUSD=X)