North American stock markets drop on concerns over economic reopenings

North American stock markets drop on concerns over economic reopenings

North American stock markets drop on concerns over economic reopenings

TORONTO — North American stock markets lost ground Tuesday on heightened concerns about the pace of economic reopenings during the COVID-19 pandemic.

Investor jitters were heightened by U.S. Senate testimony from Dr. Anthony Fauci, director of the National Institute of Allergy and Infectious Diseases, and other health officials.

Fauci warned that development of a usable vaccine that is essential to stop the spread of the novel coronavirus may take awhile. He also said the U.S. could face more “suffering and death” if states reopen too quickly.

His warnings got the attention of markets about the caution that’s needed to reopen the economy, said Catharine Sterritt, portfolio manager, equities for CIBC Asset Management.

“People are kind of pausing and going: ‘Okay, well, maybe it’s going to take longer’ and so you’re seeing that reflected in how Canadian equities are trading,” she said in an interview.

Sterritt added that Fauci’s testimony reinforced the belief that the reopenings are driven by economic considerations rather than the required response to the virus.

“What is being becoming clear is that it is taking longer to develop these testing regimes and the treatments and the vaccine is still further away,” she said, adding there are concerns about whether an adequate response will be possible in the fall to both the virus and the flu.

“So there’s lots of debate on if we do the reopen too quickly and people put down their guard, could we end up with a really terrible second wave.”

Sterritt also said the extreme fiscal and monetary stimulus is ballooning deficits while tax receipts are down because companies are shut down.

“And so what kind of tax consequences are we going to see at the other end and how much taxes are going up by.”

The S&P/TSX composite index closed down 222.06 points at 14,881.16.

Real estate was the worst-performing sector on the day, falling 3.4 per cent as a slower restart has implications because of the longer period of time where rent collections will be down.

“And those companies are higher-leveraged, so you’ve got more risk of having to do equity issuance or how is this period going to get bridged,” said Sterritt.

Likewise, the heavyweight financials sector was down two per cent because a slower restart means a longer period of credit loss provisioning, she added.

Ten of the 11 major sectors on the TSX were lower. Consumer discretionary was down 2.2 per cent as BRP Inc. and Spin Master Corp. were down six and five per cent respectively.

A six per cent drop in shares of Air Canada pushed industrials lower.

The materials index fell despite higher gold prices, though shares of SSR Mining Inc. and Alacer Gold Corp. gained as investors look another look at the merger announced Monday.

The June gold contract was up US$8.80 at US$1,706.80 an ounce and the July copper contract was down 2.1 cents at nearly US$2.36 a pound.

Energy was the sole sector to be positive on the day. It rose with higher crude oil prices as economic reopenings are positive for demand.

The July crude contract was up US$1.25 or five per cent at US$26.33 per barrel and the June natural gas contract was down a 10.6 cents at US$1.72 per mmBTU.

Smaller producers like Vermilion Energy Inc. and Frontera Energy Corp. led and were up about five per cent in response to the federal government’s loan program for large companies announced Monday.

There’s anticipation that oil and gas companies will take advantage of it despite the constraints on paying dividends, share buybacks and management compensation along with hitting carbon targets.

“That’s helping backstop the solvency risk in that group and some of the weaker players are having the biggest moves today,” she said.

In New York, the Dow Jones industrial average was down 457.21 points at 23,764.78. The S&P 500 index was down 60.20 points at 2,870.12, while the Nasdaq composite snapped a six-day winning streak by losing 189.79 points at 9,002.55.

The Canadian dollar traded for 71.35 cents US compared with an average of 71.37 cents US on Monday.

This report by The Canadian Press was first published May 12, 2020.

Companies in this story: (TSX:AC, TSX:SSR, TSX:ASR, TSX:VET, TSX:FEC, TSX:DOO, TSX:TOY, TSX:GSPTSE, TSX:CADUSD=X)

Ross Marowits, The Canadian Press

Stocks

Get local stories you won't find anywhere else right to your inbox.
Sign up here

Just Posted

Alberta chief medical officer of health Dr. Deena Hinshaw said the province still hopes to bring the hospitalization number down before relaxing restrictions. (photography by Chris Schwarz/Government of Alberta)
14 new deaths, 366 new COVID-19 cases in Alberta

Province nearing 100K COVID-19 vaccine doses administered

The first pages of the book, by Kristy Walker.
Sylvan Lake author pens first children’s book about COVID-19

“The Coronavirus Isn’t Scary” by Kristy Walker teaches children to take care of themselves

Minister of Agriculture and Forestry, MLA Innisfail-Sylvan Lake, Devin Dreeshen. (Photo Submitted)
Ag Minister announces 20% off crop insurance for Alberta farmers

Dreeshen says this will support job creators and boosting rural economy during a difficult time

An x-ray tech demonstrates the new equipment in use. (Photo Submitted)
New diagnostic equipment now operational at Sylvan Lake AACS

In August it was announced that Stephen and Jacqueline Wuori donated $850,000 to AACS

Terrance Josephson of the Princeton Posse, at left, and Tyson Conroy of the Summerland Steam clash during a Junior B hockey game at the Summerland Arena in the early spring of 2020. (John Arendt - Summerland Review)
QUIZ: How much do you know about hockey?

Test your knowledge of Canada’s national winter sport

(Photo submitted)
Central Alberta researchers recognized for studies in agricultural sciences

Jessica Sperber of Ponoka and David MacTaggart of Lacombe awarded prestigious scholarship

FILE – Canadian Prime Minister Justin Trudeau delivers his opening remarks at a news conference outside Rideau cottage in Ottawa, Tuesday, January 19, 2021. THE CANADIAN PRESS/Adrian Wyld
Vaccine CEO ‘very, very clear’ that Canada’s contracts will be honoured: Trudeau

Trudeau says he spoke to Moderna CEO on the morning of Jan. 26

A ground worker wearing a face mask to curb the spread of COVID-19 unloads lobsters from a WestJet Airlines flight at Vancouver International Airport, in Richmond, B.C., on Thursday, January 21, 2021. THE CANADIAN PRESS/Darryl Dyck
Trudeau teases stricter travel measures; Canadians flying to U.S. now need COVID test

Prime minister says measures need to not hurt imports and essential trade

(Photo submitted)
Ponoka RCMP receives new police puppy trainee

Detachment says goodbye to ‘Maja’ and welcomes ‘Neutron’

Art Kempf, originally from the Stettler area but now living in Lacombe, is pictured here with his late wife Lillian. Art’s 100th birthday is coming up on Feb. 22nd.
photo submitted
Former Stettler area resident Art Kempf will be celebrating a very special day next month

Kempf, now a Lacombe resident, marks his 100th birthday on Feb. 22nd

Whistle Stop Cafe owner Christopher Scott and his sister Melodie are serving sit-down customers in their Mirror diner to protest health restrictions that they say are unfair to restaurants and other small businesses. (Photo by Paul Cowley/Advocate staff)
Central Alberta restaurant owner defies health restrictions by serving diners

Whistle Stop Cafe owner says pandemic restrictions unfair to restaurants and small businesses

The Northwest Territories flag flies on a flagpole in Ottawa on July 6, 2020. THE CANADIAN PRESS/Adrian Wyld
Alberta man charged with threatening Northwest Territories public health officer

Police did reveal the nature of the threats, but said it was concerning

A healthy volunteer receives an injection in this undated handout image provided by Providence Therapeutics. Human clinical trials have begun in Toronto for a proposed COVID-19 vaccine by a Canadian company. Providence Therapeutics of Calgary says 60 subjects will be monitored for 13 months, with the first results expected next month. THE CANADIAN PRESS/HO-Providence Therapeutics
*MANDATORY CREDIT*
Calgary company begins human clinical trials for its COVID-19 vaccine candidate

If successful, the vaccine could be released by the end of the year

Most Read