Investor hopes for a “Santa Claus rally” this December were dashed again on Friday, as a broader slide in North American markets snapped a week of losses.
s & P/tsx The Composite index posted a second consecutive weekly decline, down 157.35 points to close at 19,443.28. Canada’s broadest stock index is down five per cent since the start of the month.
The Dow Jones Industrial Average closed 281.76 points down at 32,920.46 in New York. The S&P 500 closed 43.39 points lower at 3,852.36, while the Nasdaq Composite was down 105.12 points at 10,705.41.
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Investors may have started the month with high hopes for a “Santa Claus rally”, a term used to describe the historical trend for the month of December to deliver positive returns for Canadian and US stocks. .
But as fears of a global recession grow, so do expectations, said Brian Madden, chief investment officer at First Avenue Investment Counsel.
Madden said, “I don’t think (a Santa Claus rally) is really all that likely, given the hole we’re in after the first two weeks.”
“There will be a lot to recover from over the next two weeks.”
The week started on a positive note with the release of the latest US Consumer Price Index data, which showed that the rate of inflation in that country has started to slow down.
But Madden said the brief bump the market got from that news was quickly derailed by the US Federal Reserve, which indicated on Wednesday it would keep interest rates unchanged for most of next year to keep up its aggressive assault on prices. ready to elevate.
The European Central Bank also delivered dodgy statements this week, prompting investors to fear that the central banker will not back down from its efforts to bring inflation under control, even in the face of a looming recession.
“The bond market is crying out the loudest bearish cry — as we’ve heard for years and months,” Madden said, adding that bond yield curve inversions, such as the markets are seeing now, are a historic form of difficulty. are reliable indicators. Economic times ahead.
Oil prices continued to decline on Friday, with the February crude contract falling US$1.69 to US$74.46 a barrel.
Canadian oil and gas stocks were hit hard, with the S&P/TSX Capped Energy Index shedding 2.72 per cent – making it the hardest-hit sector on Friday.
Madden said oil’s decline last month reflected investor concerns over slowing global growth and subdued energy demand.
“Oil goes down in a recession, almost 100 percent of the time,” Madden said.
While he said patches of bull markets can still be found for savvy investors, those bright spots are becoming harder to find.
“The last hope people have is that we’re going to avert a recession.”
The January natural gas 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 ounce and the March copper contract was down 1.5 cents at US$3.76 a pound.
The Canadian dollar traded for 73.06 cents US compared to 73.31 cents US on Thursday.
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