BNN Bloomberg's closing bell update: Sept. 18, 2020
TORONTO - North American stock markets dipped to close a relatively flat week on signs of a slowing U.S. recovery and weakness in the American technology sector.
Markets started moved lower after the U.S. government announced it will ban Chinese-owned TikTok and WeChat from U.S. app stores on Sunday.
They partially recovered in afternoon trading, with U.S. markets ending down for a third-straight week.
“The negative sentiment that we've seen from the U.S. equity markets over the last couple of weeks has just continued to bleed over into this week,” said Macan Nia, senior investment strategist at Manulife Investment Management.
Friday was also unique because it was “quadruple witching,” a day that marks the quarterly expiration of U.S. stock options, stock index futures and index option contracts.
Volumes in the option market over the past couple of weeks have been very high with some technology companies seeing more activity in options than in the underlining securities.
“That speaks to the wonkiness,” Nia said in an interview.
The S&P/TSX composite index closed down 47.75 points to 16,198.97 after hitting an intraday high of 16,310.03.
In New York, the Dow Jones industrial average was down 244.56 points at 27,657.42. The S&P 500 index was down 37.54 points at 3,319.47, while the Nasdaq composite was down 116.99 points at 10,793.28.
Overall, Nia attributed the different movements of equity markets to the fact that U.S. markets posted larger gains leading into September than did the TSX.
“So from a valuation perspective, when markets are weaker, generally those markets that have run-up the most typically pull back and the TSX did not run as hot as the Nasdaq, for example, or the S&P 500.”
The U.S. technology sector continued to lose ground, with big names such as Apple, Alphabet and Amazon falling, as investors pocketed profits after a strong run that boosted valuations.
In Canada, the technology sector led the TSX, gaining nearly one percentage point as shares of Absolute Software Corp., Shopify Inc. and Blackberry Ltd. gained 7.1, four and three per cent respectively.
Anxiety from the TikTok announcement was followed by some “high frequency data” out of the U.S. which showed that the rate of economic improvement over the past couple of months is beginning to temper down, said Nia.
The released data measured real-time hours worked, credit-card spending and community developments like library openings.
“So I think it's all of these things together that has generally created this risk-off environment today, which is just pigging-backing on the risk-off environment that we've seen over the past couple of weeks,” he said.
The Canadian dollar traded for 75.84 cents US compared with 75.76 cents US on Thursday.
Eight of the 11 major sectors on the TSX were lower.
Energy was down 0.8 per cent with producers Crescent Point Energy Corp. down 2.6 per cent, Imperial Oil off 2.4 per cent and Husky Energy Inc. two per cent lower.
The November crude contract was up 10 cents at US$41.32 per barrel and up nearly 11 per cent for the week. The October natural gas contract was up 0.6 of a cent at nearly US$2.05 per mmBTU.
The December gold contract was up US$12.20 at US$1,962.10 an ounce and the December copper contract was up 4.5 cents at almost US$3.12 a pound.