TORONTO (Reuters) - Canada’s main stock index dropped on Thursday as investor nervousness with recent gains sparked a selloff in energy shares, one of the best performing sectors this year, and weighed down broader sentiment.
Investors also dissected congressional testimony by U.S. Federal Reserve Chair Janet Yellen, who urged the U.S. Congress to address the nation’s long-term budget challenges, warning that the current course was unsustainable.
The energy sector has rallied strongly since the start of the year. Despite Thursday’s decline, the group is up about 14 percent this year.
“The market is extremely volatile,” said Marcus Xu, portfolio manager at MY Capital Management Corp in Vancouver. “People are very cautious. Nobody wants to stick their neck out.”
Energy shares have been on “a pretty crazy run,” added Xu, who said it was investor caution, and not any weakness in fundamentals, that caused the decline on Thursday.
The Toronto Stock Exchange’s S&P/TSX composite index .GSPTSE closed down 110.37 points, or 0.75 percent, at 14,546.03. It is still up about 6.8 percent this year.
“Overall the TSX should be more stable than the S&P 500 this year and the returns should be a little bit higher as well,” said Xu, who recommends that investors should stay away from sectors such as technology and healthcare.
Eight of the 10 main sectors on the index were in the red on Thursday.
Investors also digested a slew of several earnings reports.
Valeant Pharmaceuticals International Inc VRX.TO reported a 35 percent jump in cash earnings, helped by robust drug sales in the United States and in its Bausch & Lomb eye care business. The stock shed 2.1 percent to C$142.07.
Telus Corp (T.TO) was up 1 percent at C$39.85 after the telecommunications company posted a higher quarterly profit.
SNC-Lavalin Group Inc (SNC.TO) reported quarterly earnings that exceeded expectations and raised its 2014 forecast. The shares of the engineering and construction company were little changed.
Linamar Corp (LNR.TO) shot up 12 percent to C$58.89 after the auto parts maker reported results late on Wednesday. The stock was the biggest percentage gainer on the index.
Editing by Peter Galloway