The S&P/TSX composite index continued its slide into bear market territory Thursday, suffering a sixth straight session of losses.
Canada's main stock index flirted with a one-year low in mid-day trading before rallying somewhat to close down 138.20 points at 19,699.05.
South of the border, investors also retreated. In New York, the Dow Jones industrial average closed down 103.81 points at 31,730.30. The S&P 500 index closed down 5.10 points at 3,930.08, while the Nasdaq composite closed up 6.73 points at 11,370.96.
There was no single event that triggered the sell-off, unlike Wednesday when markets were spooked by a worse-than-anticipated report on inflation from the U.S. Department of Labour.
"(That report) showed that inflation at these levels is likely going to be with us for the next several months, and that has reframed investors’ expectations about at what point inflation will begin to come down," said Macan Nia, co-chief senior investment strategist at Manulife Investment Management.
Instead, Thursday's market losses reflected a more general sense of economic unease as well as fears about ongoing inflation and potential future interest rate hikes — hikes that, if too aggressive, could tip the scale toward recession.
"We are seeing the continuation of the risk-off sentiment that really has been with us for the entirety of 2022," said Nia.
Rising inflation has prompted the U.S. Federal Reserve to pull its benchmark short-term interest rate off its record low near zero, where it spent most of the pandemic. The central bank has said it may continue to raise rates by double the usual amount at upcoming meetings.
Amid uncertainty around how far the Federal Reserve may be willing to go to ease inflation, North American investors so far this year have been retreating from riskier stocks and favouring safer high-yield bonds.
That trend was apparent again on Thursday, as mining stocks — generally considered more speculative than other types of investments — took a beating. The S&P/TSX Capped Materials Index closed down more than three per cent, and Canadian miners such as Wesdome Gold Mines Ltd and First Majestic Silver Corp. were down 14 per cent and almost 10 per cent, respectively.
While Shopify Inc. was up 11.55 per cent on news that several of the company's executives are purchasing shares to show their confidence in the company, other tech companies — including Docebo Inc. and Softchoice Corp. — suffered per cent losses in the double digits.
In the financials sector, Manulife Financial Corp. was down 10.23 per cent on news that the insurer's core earnings fell in the first quarter to $1.5-billion, or 77 cents a share, compared to $1.6-billion, or 82 cents a share, a year earlier.
Even energy stocks, which have been a bright spot for investors in 2022, were down on Thursday, proof that there is "nowhere to hide" in the current market, Nia said. But while Thursday may have been a "bad day in a year that's been one for the ages," he cautioned that retail investors should not overreact. Those who do are usually the ones who struggle to meet their long-term financial goals, he said.
"This is not our first rodeo with bear markets, and it’s important to stay the course," Nia said.
The Canadian dollar traded for 76.69 cents US compared with 77.10 cents US on Wednesday.
The June crude contract was up 42 cents at US$106.13 per barrel and the June natural gas contract was up 10 cents at US$7.74 per mmBTU.
The June gold contract was down US$29.10 at US$1,824.60 an ounce and the July copper contract was down 11 cents at US$4.10 a pound.
This report by The Canadian Press was first published May 12, 2022.
Companies in this story: (TSX:GSPTSE, TSX:CADUSD=X)
Amanda Stephenson, The Canadian Press