Toronto Stocks Tumble as Bond Yields Rise, Ending Win Streak
By Fergal Smith
– Canada’s primary stock index retreated from an all-time peak on Wednesday due to rising long-term interest rates and as investors assessed their positions following recent market advancements.
The S&P/TSX composite index of the Toronto Stock Exchange concluded lower by 214.46 points, a drop of 0.8%, settling at 25,839.17, following its all-time closing peak recorded on Tuesday.
The downturn brought an end to a 10-day winning streak for the market, which was the most extended sequence of gains since October 2021.
Stan Wong, a portfolio manager at Scotia Wealth Management, noted that yields have increased, raising concerns among investors and causing a bit of hesitation following the market’s recent gains.
The Canadian 10-year yield increased by 8.4 basis points to reach 3.382%, marking its highest point since January 16th. This rise occurred as investors scaled back their expectations for potential interest rate reductions from the Bank of Canada following domestic data released on Tuesday indicated an increase in core inflation during April.
U.S. Treasury yields rose as investors tracked the advancement of a tax bill in the U.S. Congress that might increase the government’s debt burden.
The real estate sector, which is highly responsive to changes in interest rates, dropped by 2.1%, while technology finished lower by 2.3%. Increased bond yields diminish the attractiveness for investors of the substantial future cash flows anticipated from high-growth tech stocks.
The banking sector’s stocks dropped by 1% as they headed into the beginning of earning season on Thursday, with Canada’s major banks preparing to report amid uncertainties in trading conditions. It is anticipated that these institutions will have bolstered their provisions for potential bad loans during the second quarter.
Among the 10 key sectors, only the materials sector, encompassing metal mining stocks, finished in positive territory, gaining 1.3%.
Wong stated that gold prices are close to all-time peaks, which has generated significant momentum within the industry.
The stock price of Canada Goose Holdings Inc rose by 19.1% following the announcement of better-than-anticipated quarterly revenues from the luxury brand.
(Reported by Fergal Smith in Toronto and Sanchayaita Roy in Bengaluru; Edited by Sahal Muhammed and Sandra Maler)