Commodities push TSX down prior to ‘Quad Witching’ option expiry

TORONTO — A drop in commodities depressed Canada’s main stock index a day before heightened volatility associated with the quarterly expiry of options known as quadruple witching.

North American stock markets were weak to start the day but partially recovered into closing.

“There was a bit of anxiety going into midday that the market [S&P 500] might break technical support below 4450. But we’ve now since recovered all that, calmed down and I think we might do this all again tomorrow because it’s Quad Witching,” said independent currency analyst Erik Bregar.

The morning “headfake” and subsequent recovery suggests “a lot of people aren’t making money today, they’re just trying to curb losses,” Bregar said.

The S&P/TSX composite index closed down 91.69 points to 20602.10 after losing as much as 138.68 points earlier.

In New York, the Dow Jones industrial average was down 63.07 points at 34751.32. The S&P 500 index was down 6.95 points at 4473.75, while the Nasdaq composite was up 20.39 points at 15181.92.

Thursday’s early losses came even though U.S. retail sales data exceeded expectations, rising 0.7 per cent, compared with the forecasted 0.7 per cent contraction due to the impact of the Delta variant.

Bregar added that weak data in Canada, such as a 2.1 per cent drop in wholesale trade in July from the prior month and housing starts falling 3.9 per cent in August compared with July, failed to have much impact on the loonie.

It was relatively flat as crude oil prices were steady after hitting a sixweek high midweek.

The Canadian dollar traded for 78.90 cents US compared with

79.05 cents US on Wednesday.

Bregar said investors might have taken the retail sales numbers as a sign that maybe the U.S. Federal Reserve’s taper plans are back in play for next week’s meeting. “Hence the spike in yields, drop in stocks, but I still have a feeling the markets can’t really make up its mind here,” he said.

“Overall it’s been a very choppy week.”

September has historically been a difficult month driven by losses in the second half of the month.

The TSX is marginally higher so far in September while U.S. markets are down. Still, North American markets are up just short of 20 per cent for the year.

Materials was the biggest laggard on the day, losing three per cent as gold and copper prices were down, prompting shares of Endeavour Silver Corp. and Oceanagold Corp. to decrease 6.6 and 6.3 per cent, respectively.

Four sectors were slightly higher on the day, including technology.