TSX, Wall St. fall amid lower commodities; traders cautious ahead of Fed meeting

TORONTO – Declining oil and gold prices weighed on Canada’s main stock market Monday, while traders also stayed cautious in anticipation of a scheduled meeting of the U.S. Federal Reserve mid-week.

At the Toronto Stock Exchange, the S&P/TSX composite index pulled back 102.56 points at 14,498.10.

The biggest weights on the index were the energy and gold sectors, which lost 3.71 per cent and 2.97 per cent, respectively. The materials sector, which contains precious and base metals miners and fertilizer companies, also gave back 1.9 per cent.

Lower oil impacted the loonie, which lost 0.43 of a U.S. cent to 75.64 cents US, as the September crude contract fell $1.06 at US$43.13 per barrel.

On Wall Street, the Dow Jones industrial average also turned negative, falling 77.79 points at 18,493.06, while the broader S&P 500 composite index faded 6.55 points at 2,168.48.

The Nasdaq composite was down marginally, giving back 2.53 points at 5,097.63. Shares in Yahoo Inc. (NASDAQ:YHOO) dipped 2.69 per cent after Verizon Communications (NYSE:VZ) announced it would buy most of the tech company’s Internet businesses for US$4.83 billion. Yahoo shares closed at US$38.32.

Craig Fehr, a Canadian markets strategist with Edward Jones, said traders are showing a little reservation ahead of the latest Fed meeting set to end on Wednesday. Many are taking a “wait-and-see” approach, although most economists don’t believe the U.S. central bank will make any moves towards interest rates.

“It’s a low likelihood that the Fed will change rates at this meeting,” said Fehr. “Much of the focus will be on any change in tone or commentary or rhetoric on how they’re viewing recent economic trends, global uncertainty and what that means for the balance of the year.”

The Fed had boosted the rate last December by a quarter-point to a range of 0.25 per cent to 0.5 per cent. At the time, it also forecasted another four rate hikes this year.

But some weak economic data from the U.S., along with the uncertainty surrounding the surprising result of the recent Brexit referendum in Britain, has kept the Fed dovish on when its next move will be.

The million-dollar question remains if Fed chairwoman Janet Yellen will announce a rate hike by the end of the year, and if so, will it happen in September or December?

Fehr said the bank is now factoring in the “third goal post” of monetary policy — beyond inflation and employment — to see whether the global economic picture is certain enough for a rate change.

No doubt, policy-makers may also shy away from a September hike due to the uncertainty over the outcome of the upcoming U.S. presidential election in November.

In other commodities, the September natural gas dipped three cents at US$2.71 per mmBTU.

Meanwhile, the August gold contract dropped $3.90 to US$1,319.50 an ounce and September copper contracts lost two cents to US$2.22 a pound.

Follow @LindaNguyenTO on Twitter.