North American markets lower as traders await non-farm payrolls; loonie up

TORONTO – North American markets closed lower Thursday amid a mixed bag of U.S. economic news, with traders sitting on the sidelines ahead of Friday’s non-farm payrolls report.

The S&P/TSX composite index lost 97.08 points to 14,405.91, while the loonie gained 0.46 of a U.S. cent to close at 76.29 cents U.S.

The Dow Jones industrial average was down 120.72 points at 17,419.75, the Nasdaq index fell 83.51 points to 5,056.44, and the S&P 500 declined 16.28 points to 2,083.56.

“The economy’s chugging along at a decent pace, but perhaps not as strong as we’d like to see,” said Kevin Headland, director of capital markets and strategy at Manulife Asset Management.

“I think everybody’s just looking for non-farm (payrolls data) tomorrow and waiting to see what happens there.”

The U.S. has seen a flurry of mixed economic reports in recent days that have left traders divided on when to expect a rate hike from the U.S. Federal Reserve.

The Labor Department said Thursday that initial jobless claims rose by 3,000 to 270,000 in the week that ended on Aug. 1.

But although first-time claims rose that week, the average number of new claims over the past month fell by 6,500 to 268,250 on a seasonally adjusted basis, raising some concerns that the U.S. Federal Reserve could proceed with an interest rate hike in September.

However, Wednesday’s ADP private-sector employment report came in weaker than expected, causing some to predict that the rate hike will be delayed until December.

Headland said investor fears about the potential impacts of an interest rate hike may be overstated.

“I don’t mind a rate hike,” Headland said. “I don’t think 25, even 50, basis points is going to change the propensity to borrow out there. I don’t think it’s going to have a material effect on the overall earnings capacity of companies. I think a lot of the U.S. dollar appreciation is priced in already.”

Despite the fact that in some instances traders have been reacting negatively to positive economic news, selling off shares in anticipation of an interest rate increase, Headland said a positive outlook for the U.S. economy outweighs the potential downsides of a rate hike.

“It’s the largest economy in the world, and if it’s moving at a decent pace, perhaps it will help lift the rest of the world and we’ll start seeing a more normalized global economy over the next couple of years,” he said.

On the commodity markets, the December gold contract rose $4.50 to US$1,090.10 an ounce, the September crude oil contract was down 49 cents at US$44.66 a barrel and the September contract for natural gas was up 1.5 cents at $2.813.

The metals and mining sector of the TSX was the biggest gainer, climbing 3.2 per cent, while the global gold segment climbed 2.1 per cent and energy rose 1.6 per cent. The health care sector lost 4.3 per cent.

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