Canadian investors had few reasons for revelry on the first day of cannabis legalization Wednesday as some of the industry’s biggest names saw their stock prices fall.
Shares in Canopy Growth Corp., Aurora Cannabis Inc., HEXO Corp. and Tilray Inc. fell between about 2% and 6.5% while the North American Marijuana Index was off by 2.4% on the day.
Investor celebrations were sparse on Day 1 of legalization, said Michael Currie, vice president and investment adviser at TD Wealth.
“Not as much as the consumers,” he said in an interview.
The main exception was Aphria Inc., which gained 71¢, or 3.8%, to $19.40, on rumours of approval of the company’s application for a U.S. listing.
Currie said trading of cannabis shares is sticking to the motto of “buy on rumour, sell on news.”
Although pot stocks have been volatile, they have enjoyed large gains over the past few years on anticipation of a boom.
The start of sales means companies will have to report revenues and profitability.
“It’s no longer speculative and hopes. We’re going to see some hard numbers coming out in the next quarter and people are saying, ‘I’ve had a nice run, why take the risk, I’m going to take my money off the table here.”‘
Currie said he doesn’t think it’s a coincidence the sector’s decline is happening on opening day.
“Until we see the first round of earnings reports, things should probably stick in this range.”
The S&P/TSX composite index closed down 49.84 points at 15,529.90, after reaching a low of 15,452.67 on 305 million shares traded.
It was led by financials and telecom services. The health care sector lost 2.5%, followed by technology and the important energy, industrials and materials sectors.
In New York, the Dow Jones industrial average was down 91.74 points to 25,706.68. The S&P 500 index was down 0.71 points at 2,809.21, while the Nasdaq composite lost 2.79 points to 7,642.70.
The down day across North American markets followed the biggest trading day in more than six months.
Much of Dow’s declines were attributable to IBM Corp, which lost 7.6% after failing to meet analysts’ expectations.
The other companies reporting so far this quarter, including Netflix, have posted strong earnings.
“That got people a bit more optimistic,” Currie said. But sentiment turned later in the session after minutes from the Federal Reserve’s last meeting got people a little ruffled on talk of rising interest rates.
The Canadian dollar traded at an average of US76.96¢ compared with an average of US77.29¢ on Tuesday.
The November crude contract was down US$2.17 at US$69.75 per barrel and the November natural gas contract was up US8.1¢ at US$3.32 per mmBTU.
Energy company stocks were hit as oil prices fell below US$70 per barrel for the first time in nearly a month. The decrease is attributable to lower political tensions between the U.S. and Saudi Arabia along with U.S. stockpiles coming in about three times larger than expected.
The December gold contract was down US$3.60 at US$1,227.40 an ounce and the December copper contract was down at US$2.78 a pound.