Canada's main stock index was down more than one per cent Friday with broad-based losses led by financial, telecom and base metal stocks, while U.S. markets also fell to close the week. 

The S&P/TSX Composite Index closed down 233.17 points, or 1.21 per cent, at 19,115.64.

In New York, the Dow Jones Industrial Average was down 286.89 points at 33,127.28. The S&P 500 Index was down 53.84 points at 4,224.16, while the Nasdaq Composite was down 202.37 points at 12,983.81.

Continued pressure from the bond market and uncertainty about the near future have been stoking caution in the equity market, said John Zechner, chairman and lead equity manager at J Zechner Associates.

Yields on the 10-year Treasury briefly touched five per cent late Thursday for the first time since 2007 and continued to hang near five per cent on Friday. 

“It’s just too much for the equity markets to bear,” Zechner said. 

“The bond market has really been leading the stock market around.”

As earnings for the third quarter roll in, investors are proceeding with caution even when companies post good results, said Zechner. For example, he noted that American Express reported earnings above estimates, but the company’s stock price was down more than five per cent Friday. 

“(Investors are) just worried. It’s selling across the board,” said Zechner.

“It’s sort of indiscriminate.” 

Yet expectations for earnings next year are still in the double digits, said Zechner.

“When you listen to the company's talk now, and the numbers come out, you know, in a slower economy with higher interest rates, we're not going to see a 10 or 12 per cent gain or profit,” he said.

“Clearly … the risk is that the earnings expectations are still too high.” 

As well, the high yields in bonds have many investors seeking the less risky investments, said Zechner. 

On the heels of a report showing Canada’s inflation continued slowing, the latest retail sales report showed cooling in August. 

The Bank of Canada will announce its rate decision next week, and these latest reports only bolstered expectations of a pause, said Zechner. 

“I think the Bank of Canada is on the sidelines, maybe for good.” 

The Canadian dollar traded for 73.02 cents US compared with 72.91 cents US on Thursday.

The December crude contract was down 29 cents at US$88.08 per barrel and the November natural gas contract was down six cents at US$2.90 per mm/BTU.

The December gold contract was up US$13.90 at US$1,994.40 an ounce and the December copper contract was down four cents at US$3.56 a pound.

With files from The Associated Press

This report by The Canadian Press was first published Oct. 20, 2023.