Fed’s hike hint drove down TSX

Last week, the TSX experienced it largest weekly loss since May (it ended the week with losses of 1.7%), says Prab Sagoo, associate director at Nasdaq Advisory Services, in his weekly market commentary.

That weakness was driven by U.S. Federal Reserve comments that hinted at a sooner-than-expected rate increase, he adds, noting that the TSX’s losses were widespread, with the TSX Equal Weight Index down 2.3% and the Small Cap Index outperforming by -1.2%.

Read: December hike still likely after latest from Fed: CIBC

The largest market losers were tech, consumer staples and gold names, while industrials also suffered.

More highlights

• Volumes have continued to move higher after the summer lull.
• Last week’s short interest data indicated the TSX continued to see an average uptick in shorts, though overall the movements were rather balanced at the end of August. Shorts against the iShares Financials ETF saw an increase, while the equivalent large cap proxy (TSX60 ETF) and the iShares Energy & Gold ETFs all experienced short covering.
• Last week’s drop saw three consumer staples names move into technically oversold territory, while only one energy name is in the overbought category.
• This week, domestic economic data will be headlined by national account data and the monthly manufacturing reading. The U.S. calendar will be active with numerous Fed speaking engagements, and consumer, industrial and manufacturing data.
• Markets should expect high volumes and volatility on Friday, as we have the quarterly S&P/TSX Indices rebalancing. There may be heavy trading in REITs and associated financials, as this is the first time investors will have to account for the new GICS classification for real estate. Read: Underweight real estate? That’s going to change
• Further, Friday will see the simultaneous expiration of futures and options contracts due to quadruple witching—this occurs on the third Friday of every March, June, September and December.

Staff

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