TORONTO — Canada's main stock index more than wiped out its gains from the day before on Thursday, declining 1.7 per cent with most major sectors down, while U.S. markets also fell.
The S&P/TSX composite index closed down 387.60 points at 22,723.21.
In New York, the Dow Jones industrial average was down 494.82 points at 40,347.97. The S&P 500 index was down 75.62 points at 5,446.68, while the Nasdaq composite was down 405.26 points at 17,194.14.
A group of U.S. economic reports released Thursday showed weakness in manufacturing, the highest level of jobless benefits applications in a year, and improved worker productivity.
With the U.S. Federal Reserve still holding interest rates high, central banks are walking a thin line between defeating inflation and cutting the economy too deep, said Jennifer Tozser, senior wealth adviser and portfolio manager with Tozser Wealth Management at National Bank.
The U.S. 10-year bond yield fell below four per cent Thursday, which would normally boost the market, but negative sentiment and nervousness around tech earnings took over, she said.
The biggest tech names on Wall St. led losses, with Nvidia down 6.7 per cent, while Amazon was down 1.6 per cent and Tesla lost 6.6 per cent.
Earnings from big tech companies have been making markets nervous after months of gains fuelled by optimism over artificial intelligence, said Tozser.
“There’s concern that expectations have been too strong,” she said.
Big tech companies’ earnings from the latest quarter have been mixed so far, with some reports underwhelming investors.
However, Meta’s stock rose almost five per cent Thursday, helping staunch some of the bleeding on Wall St. It reported better-than-expected earnings the evening before.
With the Fed set to start cutting interest rates next month, Tozser thinks the Bank of Canada will cut rates once again as well, given ongoing weakness in the economy under the weight of higher rates.
But when rates come down, the equities market is expected to see some rotation away from large-cap tech companies and into the rest of the market, said Tozser, a trend that’s already beginning to emerge.
“We’re starting to see it, because it’s such a high degree of confidence the rate cut’s coming,” she said.
That’s a healthy thing for the market, she said, which throughout the year has been pulled up and, especially this month, swung around by the largest tech names amid the bets on AI.
The Canadian dollar traded for 72.22 cents US compared with 72.42 cents US on Wednesday.
The September crude oil contract was down US$1.60 at US$76.31 per barrel and the September natural gas contract was down seven cents at US$1.97 per mmBTU.
The December gold contract was up US$7.80 at US$2,480.80 an ounce and the September copper contract was down nine cents at US$4.08 a pound.
— With files from The Associated Press
This report by The Canadian Press was first published Aug. 1, 2024.
Companies in this story: (TSX:GSPTSE, TSX:CADUSD)
Rosa Saba, The Canadian Press