Canada Stocks Lose 85 Pts As Mini Rally Ends With Nuvei Weighing; Wells Fargo Investment Institute With 2022 Outlook on Equities

Canada's main stock market closed Wednesday down near 85 points at near 21,080, after the Index had gained near 530 points over the last two full days. The see-saw nature of markets in recent weeks — not least since the Toronto Stock Exchange hit all time record highs around 21,800 in early November — appears to reflect the fact that investors have had to try and get their heads around a lot of different factors, including high inflation and coming monetary policy changes, in addition to the emergence of the omicron virus variant.

Among sectors, Info Tech was down 1.2% and Industrials down more than 1%. But Health Care was up 1.3%, led by cannabis stocks. Among individual stocks Nuvei Corp. NVEI dropped 40% after a prominent short seller said it was betting against the Montreal-based payment processor.

For its part, Wells Fargo Investment Institute in its 2022 Outlook on Equities has suggested that Canadian companies with operations or leverage in the United States may have the best outlook, particularly if they are also in the Info Tech space.

WFII said: "While we believe this market cycle is still in its early stages, it is likely past the peak rate of earnings growth. Even so we expect above average revenue growth and steady or slightly higher operating margins to guide the level of earnings even higher.

"Despite the Federal Reserve tapering its bond buying program n 2022, we expect overall monetary policy to support equity prices. Fiscal policy should be less of a tailwind, and midterm elections may pose market sentiment concerns.

"The S&P 500 Index and Russell Midcap Index have more exposure to the Information Technology sector that we believe will outperform as economic and earnings growth normalizes."

WFII said international equity markets face competing forces that ultimately leave them less favourable compared to US equities. It added: "We expect economic growth differentials to favour the U.S., resulting in dollar strength, at least through early next year. We expect the global recovery to continue in 2022, but the economic, earnings and currency picture continues to favour the U.S.

Of commodities, gold was mostly steady on Wednesday as the dollar fell and bond yields rose with little economic data to affect prices, while concerns over a potential Russian threat to Ukraine is supporting the metal. Gold for February delivery settled up $0.80 to US$1,785.50 per ounce.

Meanwhile, West Texas Intermediate crude oil rose for a third-straight session as fears over the spread of the Covid-19 omicron variant eased after Pfizer said booster shots of its vaccine were effective in preventing infections, while U.S. inventories fell less than seen. WTI crude for January delivery closed up $0.31 to US$72.36 per barrel, Marketwatch reported. February Brent crude, the global benchmark, was last seen up $0.39 to US$75.83, while Western Canada Select was up $1.06 to US$55.93 per barrel.