S&P/TSX composite slides again as hopes for ‘Santa Claus rally’ fade

TORONTO –

Investor hopes for a “Santa Claus rally” this December have been dampened but once more Friday, as broad-based declines capped every week of losses on North American markets.

The S&P/TSX composite index closed down 157.35 factors at 19,443.28, for its second straight weekly loss. Canada’s largest inventory index is down 5 per cent because the starting of the month.

In New York, the Dow Jones industrial common closed down 281.76 factors at 32,920.46. The S&P 500 index ended the day at 43.39 factors at 3,852.36, whereas the Nasdaq composite was down 105.12 factors at 10,705.41.

Investors might have began the month with excessive hopes for a “Santa Claus rally,” a time period used to explain what has been a historic tendency for the month of December to ship optimistic returns for Canadian and U.S. shares.

But as recession fears mount globally, these hopes are rapidly dwindling, mentioned Brian Madden, chief funding officer with First Avenue Investment Counsel.

“I don’t think (a Santa Claus rally) is really all that likely, considering the hole we’re in after the first two weeks,” Madden mentioned.

“That would be a lot of ground to recover in the next two weeks.”

The week began positively with the discharge of the newest U.S. shopper worth index knowledge, which confirmed the speed of inflation in that nation is starting to gradual.

But Madden mentioned the temporary bump markets acquired from that news was rapidly derailed by the U.S. Federal Reserve, which on Wednesday signaled that it’s prepared to maintain rates of interest excessive for many of subsequent yr to keep up its aggressive assault on costs.

The European Central Bank additionally made hawkish statements this week, including to investor fears that central bankers will not retreat from their efforts to get inflation beneath management, even within the face of a looming recession.

“The bond market has been screaming recession loudly — like louder than we’ve heard for year — for months and months,” Madden mentioned, including bond yield curve inversions, reminiscent of markets are seeing proper now, are a traditionally dependable indicator of inauspicious financial instances forward.

Oil costs additionally continued their slide on Friday, with the February crude contract down US$1.69 at US$74.46 per barrel.

That took a chew out of Canadian oil and fuel shares, with the S&P/TSX capped power index declining 2.72 per cent — making it the hardest-hit sector Friday.

Madden mentioned oil’s decline within the final month is a mirrored image of slowing world development and investor considerations about what that can as a result of power demand.

“Oil goes down in a recession, pretty much 100 per cent of the time,” Madden mentioned.

While he added there are nonetheless patches of bull market to be discovered for savvy buyers trying, these shiny spots are getting more durable to seek out.

“Any last hopes that people have that we’re going to avert a recession are evaporating.”

The January pure fuel contract was down 37 cents at US$6.60 per mmBTU.

The February gold contract was up US$12.40 at US$1,800.20 an oz and the March copper contract was down one-and-a-half cents at US$3.76 a pound.

The Canadian greenback traded for 73.06 cents US in contrast with 73.31 cents US on Thursday.

This report by The Canadian Press was first revealed Dec. 16, 2022.