The S&P/TSX Composite closed at 35,041.86 on Wednesday, down 607.65 points or 1.7%, the lowest close in the 23 sessions since September 4. The index is 4.0% below its September 4 close and 5.5% below its 52-week high of 37,069.11.
Financials led the decline. RBC fell $4.23, or 2.2%, to $192.12 and TD fell $3.55, or 3%. Gold fell about 3%, with Barrick down 3.6% and Agnico Eagle down 2.8% according to Trading Economics, while consumer staples, telecoms and health care rose. The TSX Venture Exchange fell 1.9% to 873.42.
A Rate-Driven Tape
The index has traded as a duration asset for a month. Over the 21 sessions from September 9 to October 7, the correlation between the TSX daily percentage change and the daily change in the US 30-year Treasury yield was negative 0.66. On the 14 sessions when the yield rose, the TSX averaged a loss of 0.36%. On the other 7 it averaged a gain of 0.30%.
The three largest TSX declines in that window with a matching yield reading all came on yield-up days: 1.70% on October 7, 1.61% on September 23 and 1.11% on September 10. The 30-year yield rose 4.2 basis points on October 7, 9.9 on September 23 and 7.5 on September 10.
The TSX Composite has lost 3.56% since September 22 and closed below its five-session average, the same period in which the 30-year Treasury yield gained 38 basis points.
The dashed grey line is a five-session moving average of the close. The lower dashed line marks the October 1 close of 35,154.76, the prior low of the period.
What Wednesday Added
The Federal Reserve minutes released Wednesday showed participants backed the September 16 hike to 3.75% to 4.00%, and most participants judged another increase would likely be appropriate by year end. Markets price roughly a 17% to 19% chance of an October hike and about 85% by December.
Canadian markets priced the Bank of Canada alongside it. Markets expect at least one 25 basis point hike from the Bank by year end, the Government of Canada 10-year yield was 3.985% and the loonie traded near C$1.426 per US dollar.
Energy and Deals Are Not Offsetting It
Oil closed Wednesday near $100 a barrel, and Imperial Oil (down 2%) and Cenovus (down 1.8%) gave up early gains. Deal activity continues but is stock-specific. Athabasca Oil rose 13.5% on October 5 after Cenovus agreed to buy it for C$5.7 billion, and Cenovus fell 3%. ATCO rose 9% on October 6 on a proposed merger and spin-off with Canadian Utilities and Emera.
Brent rose above $105 early Thursday and stocks were lower. A US 30-year Treasury auction is scheduled for 1 p.m. ET, followed by the Canadian jobs report on Friday, September CPI on October 19 and the Bank of Canada decision on October 28. The October 1 close of 35,154.76 was the prior low of the period, and Wednesday closed below it.