S&P/TSX composite follows US markets lower as financial sector slips

Toronto traders returned to a tepid market on Tuesday, as the Toronto Stock Exchange closed slightly lower on the first day of a short week.

Natalie Taylor, a portfolio manager with CIBC, said that the beginning of earnings season, led by U.S. banks, was not enough to excite the market on Tuesday — despite a strong showing from U.S. markets on Monday.

“Typically when the Canadian market’s closed, on the day that it starts trading again, you’ll see a bit of a catch up,” said Taylor. “I would have expected a little bit more strength here in Canada … it’s been pretty quiet.”

The S&P/TSX composite index was down 51.98 points at 16,510.83.

Many sectors held steady, but the S&P/TSX Capped Financial Index closed more than one per cent lower. Taylor attributed the decline to U.S. corporate earnings reports from JPMorgan Chase, Citigroup and BlackRock, although the firms reported better-than-expected results.

“U.S. earnings kicked off today with the financial sector,” said Taylor. “I think the outlook for revenue is pretty muted, given where interest rates are today. And then loan growth is also very tepid, given that we’re seeing repayment of any kind of credit lines that were drawn during the height of the crisis.”

Taylor said that after a tough second quarter — as businesses absorbed the impacts of COVID-19 lockdowns — expectations for third-quarter earnings have crept higher.

“That’s really what’s going to drive the market going forward,” said Taylor.

“We know we’re going to be up versus Q2 and we’re expecting a strong Q3. Whether those expectations have gotten ahead of themselves at this point — and what the outlook is from here — is going to be very important to gauge how we finish the year here in the market.”

In New York, the Dow Jones

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