North American shares tumble as markets on track for worst week in two years

North American markets were on track Friday for a shaky end to a volatile week, as shares tumbled on falling oil prices and stronger economic data from the U.S. that raised the threat of inflation and higher interest rates.

The S&P/TSX Composite lost 160 points, or just over one per cent, to 15,700.45 points in the morning. 

Earlier, the benchmark index had hit its lowest intraday level since October, putting it on track for biggest drop in two years.

The energy and materials sectors were among the hardest hit, as crude oil and gold prices fell.

Benchmark U.S. crude fell 99 cents to $ 64.81 US a barrel in New York, while gold was down 1.4 per cent to $ $ 1,329.62 an ounce.

Shares of Imperial Oil were down over three per cent after its fourth quarter earnings fell short of market expectations.

Weed prices

The healthcare sector was the biggest loser on the index as marijuana stocks continued to decline.

Analysts said cannabis producers will continue to see more volatility in the weeks ahead on issues such as oversupply in stock and falling prices.

A government web survey on Friday showed that Canadian marijuana costs $ 6.85 a gram after suggesting earlier that weed prices have been falling in recent years as illegal producers boosted production.

Shares of the country’s biggest marijuana producer Canopy Growth fell over nine per cent in the morning. 

Strong jobs data

In the U.S., stocks fell across the board after jobs data showed the strongest annual wage growth since 2009, raising the prospect of higher inflation and more interest rate hikes.

Nonfarm payrolls jumped by 200,000 jobs in January after rising 160,000 in December, while the unemployment rate remained at a 17-year low of 4.1 per cent. 

But Scotiabank economist Derek Holt said in his morning note that he was cautious about the acceleration in wage growth for a few ​reasons.

“Wages may have accelerated … but incomes in aggregate were dented by working fewer hours,” he said. 

Meanwhile, the Dow Jones Industrial Average fell 1.3 per cent to 25,842.73, while the S&P 500 was down over one per cent to 2,792.54 points.

The tech heavy Nasdaq Composite dropped one per cent to 7,315.82 in the morning.

The sharp fall in the U.S. market this week puts it on track for its worst week in two years.

Robert Kavcic of BMO Capital Markets said the “relentless” rise in bond yields is probably not helping markets at this point.

“The 10-year Treasury is pushing 2.8 per cent for the first time since early 2014, and the two-year is nearing 2.2 per cent for the first time since the Fed eased aggressively during the financial crisis,” he said.

As interest rates rise, the value of existing bonds falls and borrowing to invest becomes more expensive.

Earnings impact

Weak earnings from several large companies like Exxon Mobil, Chevron and Google’s parent company, Alphabet, also weighed on the benchmark indexes.

Index heavyweight Apple’s shares were also down almost three per cent after its earnings on Thursday showed that the tech giant sold 77.3 million iPhones in the last quarter, below the 80 million expected by analysts.  

The Canadian dollar, meanwhile, was trading at 80.69 US cents, down from the average price of 81.38 US cents on Thursday. 

The greenback was stronger against most major currencies on the strong jobs data.

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