Business

U.S. stocks close higher but lose over 5% for week, TSX ends down

Canadian job losses and sliding oil price weigh on Canadian market Friday

February 09, 2018

The Dow Jones, S&P 500 and Nasdaq all lost over five per cent for the week. (Richard Drew/The Associated Press)

North American markets closed mostly higher on Friday in volatile trading, but the week's steep sell-offs resulted in all three U.S. benchmark indexes losing over five per cent.

The Dow Jones industrial average finished up 1.4 per cent or 334 points to 24,194 but lost 5.2 per cent for the week.

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The broader S&P 500 index also regained ground to end up 1.5 per cent to 2,620, while the tech-heavy Nasdaq composite added 1.4 per cent to 6,874 points.

But both indexes were down more than five per cent for the week as well.

The Dow and S&P 500 saw their biggest weekly drop since January 2016, while the Nasdaq posted its biggest weekly loss since February 2016.

The Dow had plunged more than 1,000 points on Thursday, pushing it, the S&P 500 and the Nasdaq to fall more than 10 per cent from their record highs on Jan. 26. That meant all three indexes dipped into what is considered a "correction" in the markets.

The yield on the benchmark 10-year treasury note stood at 2.85 per cent — off from the four-year high of 2.885 hit on Monday. The bond is considered to be the global driver of borrowing costs.

As interest rates rise, the value of existing bonds falls and borrowing to invest becomes more expensive.

"The fact that Monday's lows were breached on Thursday signals more trouble ahead, and rallies are likely to give way to rising bond yields," Peter Cardillo, economist at First Standard Financial in New York, told Reuters.

The CBOE Volatility index, which is the main gauge of expected volatility on Wall Street, rose to 29 by the close of trading — but it still well below over 50 hit on Tuesday, which is a 2½-year high.

Canada down

The Canadian market closed down, but off its lows for the day, as oil prices fell and Statistics Canada released disappointing jobs data.

The S&P/TSX composite index ended lower by 0.2 per cent at 15,034 — marking its lowest level since September.

Economic data on Friday showed the economy had lost a surprising 88,000 jobs in January, hitting its biggest one-month decline in nine years. 

"The concentration of the job loss in Ontario and the focus upon lost part-time jobs in that province will no doubt feed debate on whether large minimum wage hikes took a toll on employment, but proving causality may remain contentious," said Derek Holt, economist at Scotiabank in a note.

"It's possible the Bank of Canada dismisses most of this report as a transitory adjustment to higher minimum wages," he added.

The Canadian dollar traded at an average of 79.31 US cents, down from 79.46 cents on Thursday.

The loonie has been facing weakness from the strength of the U.S. dollar as investors fled to the safety of the reserve currency amid volatility.

Oil falls below $60

Meanwhile, benchmark U.S. crude oil fell below $60 US a barrel for the first time this year, falling $1.95 to settle at $59.20 as investors dumped risky assets.

Concerns of oversupply the U.S. market also weighed on the commodity.

Shares of energy giant Encana fell 3.5 per cent, while Cenovus Energy lost nearly five per cent.

Markets around the world also reeled Friday from the sell-off on Wall Street on Thursday.

Mainland Chinese shares led the declines with the Shanghai composite losing over four per cent, while Hong Kong's Hang Seng index lost over three per cent.

Asia's biggest market — Japan's Nikkei 225 index — lost 2.3 per cent.

In Europe, the benchmark Stoxx 600 index closed down 1.5 per cent, with all sectors in negative territory.

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