Canadian stocks fell, after climbing to a five-year high yesterday, as U.S. Federal Reserve Chair Janet Yellen said central bank stimulus could end this fall and benchmark interest rates could rise six months later.
Air Canada rose 1 percent after Standard & Poor’s upgraded its debt rating on the airline yesterday. Athabasca Oil Corp. dropped 4.1 percent after reporting a quarterly loss and forecasting declining production. Canfor Corp. rallied 2.4 percent, snapping an eight-day decline, as Raymond James & Associates upgraded its rating on the wood products producer.
The S&P/TSX Composite Index fell 34.94 points, or 0.2 percent, to 14,334.04 at 4 p.m. in Toronto. The index has risen 5.2 percent this year.
“It looks like the Fed has opened up a bit to look beyond unemployment, so it gives them some more flexibility,” said Greg Eckel, fund manager at Morgan Meighen & Associates Ltd. in Toronto. He helps manage about C$1.4 billion with the firm.
The U.S. central bank said it will look at a wide range of data in determining when to raise their target interest rate from zero, dropping a pledge tying borrowing costs to a 6.5 percent unemployment rate.
The Fed predicted the rate would be 1 percent at the end of 2015 and 2.25 percent a year later, higher than previously forecast, as they upgraded projections for gains in the labor market. The Fed also reduced the monthly pace of bond purchases by $10 billion, to $55 billion.
Yellen said the quantitative easing program would end this fall if the Fed continues to taper purchases in measured steps. She said she sees a “considerable time” between the end of the stimulus and the first rate increase, meaning “six months or that type of thing.”
The Canadian market is especially sensitive to changes in commodities, Eckel said. “A big driver has been the gold stock play, and it looks like some of the wind has come out of the sails there. The market has been spotty, a little nervous,” he said.
Gold for immediate delivery fell the most in three months today, dropping 1.9 percent.
Air Canada rose 1 percent to C$6.00, bringing this week’s gain to 7.7 percent. S&P raised the company’s debt rating to B from B -. The company has said it plans to squeeze more seats onto jets in its Rouge unit to turn unprofitable routes around.
Athabasca Oil fell 4.1 percent to C$8.05. The company, which operates in the Alberta oil sands, forecast oil production would be 6,000 to 6,500 barrels a day in the first quarter and dip to 5,500 to 6,000 barrels a day in the second quarter.
Canfor rose 2.4 percent to C$27 after Raymond James raised the company to strong buy from outperform. The stock lost 12 percent during the eight days through yesterday. Pulp mills in northern Alberta may be forced to suspend operations as early as this week because a labor dispute by truckers at Canada’s largest port is causing lumber to pile up.
First Quantum Minerals Ltd. fell 2.5 percent to C$19 after Evrim Resources Corp. said in a statement that First Quantum had pulled out of a partnership to mine copper in Mexico.
BlackBerry Ltd. rose 4.8 percent to C$10.75. The smartphone maker is up 36 percent this year.