TSX Drops as Elevated Yields Pressure Stocks

The S&P/TSX Composite Index fell 1.7% to close at 35,042 on Wednesday as concerns over high bond yields returned to the forefront, threatening earnings projections for credit-sensitive sectors. Oil prices softened from earlier gains, easing inflation concerns. Still, tight credit conditions persisted, and US Fed FOMC members agreed that higher rates are needed to tame inflation, according to the latest meeting minutes. Canadian sovereign bonds fell, further pressuring credit-sensitive stocks. RBC shed 2.3%, while TD Bank lost 3.3%. Markets are pricing in at least one 25-basis-point Bank of Canada rate hike by year-end. Meanwhile, gold prices declined, weighing on miners, with Agnico Eagle down 2.8% and Barrick losing 3.6%. Energy producers also erased earlier gains amid the oil pullback, with Imperial Oil down 2% and Cenovus losing 1.8%.

The S&P/TSX Composite Index fell more than 1% below 35,500 on Wednesday amid elevated oil prices and rising bond yields. Crude oil climbed on persistent risks to Middle Eastern energy flows, raising inflation concerns and reinforcing expectations of a prolonged higher-interest-rate environment. The move compounded the impact of higher US deficit spending on elevated domestic yields. Canadian sovereign bonds fell, further pressuring credit-sensitive stocks. RBC shed more than 1.5%, while TD Bank, BMO, Scotiabank and CIBC lost about 2% each. Markets are pricing in at least one 25-basis-point Bank of Canada rate hike by year-end. Meanwhile, gold prices declined, weighing on miners, with Agnico Eagle, Barrick, WPM and Franco-Nevada falling around 3% each. In contrast, energy producers gained as the oil rally resumed, with Suncor, Imperial Oil and Cenovus up more than 1% each.

Futures tracking Canada’s stock market fell on Wednesday amid elevated oil prices and rising bond yields. Crude oil climbed on persistent risks to Middle Eastern energy flows, raising inflation concerns, and reinforcing expectations of a prolonged higher-interest-rate environment. This worsened the impact that higher deficit spending in the US has on elevated domestic yields. Canadian sovereign bonds fell and further pressured credit-sensitive stocks. Markets are pricing in at least one 25-basis-point Bank of Canada rate hike by year-end. Meanwhile, gold prices declined, weighing on mining stocks.