Midday: TSX declines on fears of an economic slowdown. Plunge canopy growth

A currency trader watches observers at a forex trading room in Seoul, South Korea on Thursday in this file photo.Lee Jin-man / The Associated Press

Canada’s main stock index fell on Thursday and was headed for its worst quarter in nine on growing fears of a sharp global economic slowdown, while a 20% drop in growth parachuted down the healthcare sector.

In morning trading, the S&P/TSX Composite Index on the Toronto Stock Exchange was down 314.6 points, or 1.65%, to 18,764.04.

Markets around the world slumped to extend what was the worst first half of the year for global stock prices ever, as investors feared that the latest display of the central bank’s determination to tame inflation would quickly slow economies.

“I think recession fears continue to drive sentiment at the moment, driven by central banks continuing to warn that the fight against inflation is likely to be a long one, which is the primary message coming out of this week’s ECB forum,” said Stuart Cole, chief macroeconomist. At Equiti Capital.

Healthcare stocks fell 4.5%, edging down 20.3% in Canopy Growth after the pot producer announced a convertible note exchange.

The benchmark index, which is down 14% so far this quarter, was on track to post its worst quarterly performance since the pandemic-induced downturn in March 2020.

The energy sector fell 1.6% on the back of weak crude prices, while the materials sector, which includes precious and base metal miners and fertilizer companies, lost 2.1% after weak copper prices.

Canada’s economy grew 0.3% in April, matching analyst expectations, largely driven by the oil and gas sector, but based on a preliminary estimate, it will likely contract 0.2% in May, according to Statistics Canada.

“If you look at the monthly numbers, they suggest a slowdown in activity – we’ve now seen a slowdown in growth for the third month in a row – and it’s hard to see a quick reversal given the aggressive monetary policy stance of the Bank of Canada,” Cole added.

Both the financial and industrial sectors fell 1.8% each.

US stocks also fell on Thursday, sending the S&P 500 index to its worst six months since 1970, on concerns that central banks bent on taming inflation will hamper global economic growth.

Fears of slower growth and higher prices have spread to markets, with recession fears taking center stage as monetary policymakers around the world look to aggressively increase borrowing costs.

Federal Reserve Chairman Jerome Powell pledged on Wednesday not to allow the US economy to slide into a “higher inflation regime,” even if it means raising interest rates to levels that put growth at risk.

The tech-heavy Nasdaq Composite is set for its biggest drop ever during the first half, while the Dow Jones Industrial is set for its biggest percentage drop in January-June since the financial crisis.

All three indices should post their second consecutive quarterly declines for the first time since 2015.

Federal Reserve policy makers in recent days have projected a second rate hike of 75 basis points in July even as economic data paints a bleak picture for the American consumer.

“People are raising money in earnings season,” said Josh Wayne, portfolio manager at Hennessy Funds.

“We’ve listened a lot to the Fed about what they’re going to do. A lot of people are waiting to hear from companies about what’s really going on and the state of the consumer, trying to get additional information before really committing to stocks.”

Shares of big-growth companies including Microsoft Corp, Apple Inc, Amazon.com Inc and Tesla Inc fell between 2.6% and 5.2%, leading to declines today.

A report from the Commerce Department showed that the core personal consumption expenditures index in May was slightly below expectations, although consumer spending rose less than expected.

Many investors were expecting the inflation data to actually start to fall. “But what we find is that it is much more challenging, and that inflation data is staying elevated for longer and may not have peaked,” said Sam Stovall, senior investment analyst at CFRA.

At 10:22 AM ET, the Dow Jones Industrial Average fell 527.89 points, or 1.70%, to 30,501.42 points, the S&P 500 fell 73.94 points, or 1.94%, to 3,744.89 points, and the Nasdaq Composite dropped 304.66 points, or 2.73 points . %, at 10873.23.

Heading into the second half of the year, battered markets will continue to focus on inflation, unemployment, and interest rate increases along with their impact on corporate earnings.

Pharmacy chain Walgreens Boots Alliance Inc slumped 5% as its quarterly profit plunged 76%, hit by an opioid settlement with Florida and a drop in US drugstore sales due to slumping demand for COVID-19 vaccines.

Declining issues outnumbered advanced stocks by 4.54 to 1 on the New York Stock Exchange and 4.43 to 1 on the Nasdaq.

The S&P recorded a new 52-week high and 42 new lows, while the Nasdaq recorded nine new highs and 305 new lows.

Reuters

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