S&P/TSX combined drops by more than 200 points, and the U.S. market falls amid debt concerns
Christopher Reynolds
The S&P/TSX composite index fell by 216.46 points at 25,839.17, the largest slide since April 10.
In New York, the Dow Jones industrial average fell 816.80 points to 41,860.44. The S&P 500 fell 95.85 points to 5,844.61, while the Nasdaq dropped 270.07 points to 18,872.64.
Stocks have mixed forecasts for the coming profits after Target and other retailers made mixed forecasts for the coming profits due to uncertainty created by U.S. President Donald Trump’s trade war. But markets in the northern and southern borders turned downward after the U.S. government released the latest 20-year bond auction results.
The government sells these bonds regularly to borrow money to pay its bills. In this auction, the U.S. government must pay a 5% yield violation to attract enough buyers to lend $16 billion in loans over 20 years, increasing the yield on U.S. Treasury bonds but reducing the prices of various other investments.
“With five percent, it’s starting to be a little sticky to the stock market,” said Mike Archibald, vice president and portfolio manager for Toronto-based AGF Investments Inc.
“Obviously, the market has some concern about the budget deficits that are still happening in the U.S. market right now.” So, higher bond yields: “You will have to issue more bonds to pay for the deficit.”
This could also lead to higher rates for U.S. households and businesses, including interest rates on mortgages, car loans and credit cards, when the U.S. government has to pay more interest to borrow money. In turn, it can slow down the economy. Higher yields also often make investors less willing to pay high prices for stocks and other types of investments.
The rise in yields is partly due to concerns that the tax cuts currently being considered in Washington, D.C. could add millions of dollars in debt. As big companies try to dilute the price shock by spreading this pain on the mainland, there are still concerns about how much tariffs Trump’s tariffs will drive to drive inflation.
Archibald noted: “They are in a tax bill that is trying to negotiate through the House of Representatives, which includes some permanent tax cuts” (the consequent deficit”.
Areas that outperformed Wednesday on S&P/TSX composites include the “defensive” index, such as materials (mainly composed of mining companies), as well as energy as well as utilities and consumer staples. All other departments saw the loss.
“This is really just the golden name that has performed well again for the second day in a row,” Archibald said. “This is clearly where the market tends to seek defensive exposure.”
He said that despite this, concerns about “peak tariffs” are still in the rearview mirror.
“We’ve gotten rid of the lows… It’s frustrating that it’s healthy to consolidate some of these gains.”
Toronto – Ruling Bank will start a week of Canadian bank earnings on Thursday, giving a glimpse into the domestic economic outlook and how buyers and borrowers feel.
“We will get a good read on the state of the Canadian economy, especially the state of Canadian consumers,” Archibald said.
Canadian dollar traded for 72.21 cents, while we were 71.76 cents on Tuesday.
The crude oil contract in July fell 46 cents to $61.57 a barrel, while the natural gas contract in June fell 6 cents to $3.37 a MMBTU.
The June gold contract rose $28.90 per ounce, and the July copper contract rose two cents at $4.67 per pound.
– Documents with the Associated Press
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