U.S. Markets

Toronto stocks drop as Powell nomination weighs on technology sector

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  • TSX ends down 134.26 points, or 0.6%, at 21,420.77
  • Technology stocks fall on Powell reappointment
  • Losses partly offset by gains for financials
  • Energy subindex follows oil prices higher

Nov 22 (Reuters) - Canada's main stock index posted a fourth straight day of losses on Monday, as the prospect of higher interest rates next year weighed on technology stocks such as Shopify (SHOP.TO) after Jerome Powell was tapped to continue as Federal Reserve chair.

The Toronto Stock Exchange's S&P/TSX composite index (.GSPTSE) ended the day down 134.26 points, or 0.6% at 21,420.77.

The technology subindex (.SPTTTK) was the biggest loser, falling 3%, as its biggest component, Shopify Inc lost 5.2%. Shopify is Canada's most valuable company.

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Powell is seen as slightly more hawkish than Governor Lael Brainard, the other top candidate for the job who will be vice chair, said Philip Petursson, chief investment strategist at IG Wealth Management.

"This indicates to the market that you will see a response out of the Fed perhaps quicker than a Brainard Fed," he said. "That's what's impacting technology to the downside... and in Canada, Shopify can move the market."

Large technology stocks are generally seen as inflation hedges. In addition, payment processing services like Shopify charge per transaction, so steps by the central bank to tame inflation can be viewed as negative.

Investors also remained on edge over the flood situation in Canada's westernmost province, British Columbia, where more potentially damaging weather is forecast this week. read more

Financials gained 0.2% and energy rose 0.1%.

The gains in financial stocks mirrored those of Wall Street banks, which outperformed broader markets as investors anticipated faster U.S. interest rate hikes in 2022.

Biden's pick of Powell gave global investors stability and some predictability as the Fed plans to withdraw stimulus. read more

Oil prices gained 0.3% on reports that OPEC+ could adjust plans to raise oil production if large consuming countries release crude from their reserves or if the coronavirus pandemic dampens demand. read more

Canadian energy company Crescent Point Energy (CPG.TO) was among the biggest gainers in Toronto, ending the day up 4%.

Pembina Pipeline (PPL.TO) shares, however, fell 2.7% to C$40.50, after the company said its CEO would step down to pursue other opportunities, and its CFO would take over as interim chief.

Air Canada (AC.TO) shares fell 1.4% to C$23.21 after the company agreed to a $4.5 million settlement to resolve a U.S. government investigation into claims thousands of air passenger refunds were delayed. read more

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Reporting by Nichola Saminather in Toronto; editing by Richard Pullin

Our Standards: The Thomson Reuters Trust Principles.

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