Banks, materials take TSX to two-week low as Fed stays course
By John Tilak
TORONTO (Reuters) - Canada's main stock index slipped on Wednesday to its lowest closing level in two weeks, dragged by declines in materials and financials, as investors digested a statement from the Federal Reserve that the U.S. central bank will continue its bond-buying stimulus program.
Weakness in Potash Corp (POT.TO: Quote), which extended its declines after news of the breakup of a Russian-Belarussian potash joint venture on Tuesday sent shockwaves through the industry, further weighed on the market.
Data showed U.S. economic growth unexpectedly accelerated in the second quarter, laying a firmer foundation for the rest of the year that could bring the Federal Reserve a step closer to cutting back its monetary stimulus.
The resource-heavy Toronto market declined far more sharply than U.S. stocks, extending a theme of underperformance this year.
The market has slightly warmed up to material stocks in recent weeks, said Paul Taylor, chief investment officer at BMO Asset Management.
"But is there any permanent change in investor behavior related to the commodity sector? The answer is no," he said. "The case for a sustainable, predictable run in commodity prices is just not there."
The U.S. Federal Reserve said the economy continues to recover but is still in need of support, offering no indication that it is planning to reduce its bond-buying stimulus at its next meeting in September.
"The Fed is managing the message very carefully," Taylor said. "They're making every attempt to stay on story." Continued...