TORONTO – Canada’s main stock index fell 1.4 per cent Thursday, with broad losses led by base metals and technology, while U.S. stock markets also fell as drops in major tech stocks weighed on Wall Steet.
Earnings from Meta and Microsoft didn’t quite achieve investors’ lofty expectations, said Kevin Headland, chief investment strategist at Manulife Investment Management.
Tech stocks have had quite the run this year, driven by hype over artificial intelligence, and have often exceeded the high expectations set for them during earnings seasons. But even when investors get what they want, it doesn’t seem to be good enough, said Headland.
“It’s interesting how it’s not about meeting expectations, it’s about beating expectations,” he said, adding that markets are “priced for perfection,” particularly for mega-cap stocks.
The tech-heavy Nasdaq composite fell 512.78 points or 2.8 per cent at 18,095.15.
In New York, the Dow Jones industrial average was down 378.08 points or 0.9 per cent at 41,763.46, while the S&P 500 index was down 108.22 points or 1.9 per cent at 5,705.45.
The S&P/TSX composite index closed down 350.92 points at 24,156.87.
Both Meta and Microsoft reported profits that were better than forecast, but it still wasn’t enough: Microsoft’s estimate for its cloud computing business fell short of some expectations while Meta’s planned spending on AI worried others.
Markets are dissecting every detail, said Headland, and seemed uncertain about some of them.
“The expectations kept getting loftier and loftier, and it becomes harder and harder to meet and especially beat those expectations,” he said.
Despite Thursday’s tech-led losses, in recent months the markets have shown signs of better breadth and depth, said Headland, which he said is a “good news story.”
The Personal Consumption Expenditures index, a measure of inflation the U.S. Federal Reserve watches, slowed in September to 2.1 per cent. The report was more or less as expected, said Headland.
Meanwhile north of the border, Canada’s economy stalled in August and GDP for the third quarter looks likely to fall short of the Bank of Canada’s estimates.
The report, though a little weaker than anticipated, wasn’t a huge surprise either, said Headland. The Bank of Canada has one more interest rate decision later this year, and he thinks it’s possible they could announce a second supersize half-percentage-point cut as economic data continues to weaken.
“I would not be surprised … if I saw another 50-basis-point cut, given inflation is lower than targeted,” he said.
The Canadian dollar traded for 71.86 cents US, unchanged from Wednesday.
The December crude oil contract was up 65 cents at US$69.26 per barrel and the December natural gas contract was down 14 cents at US$2.71 per mmBTU.
The December gold contract was down US$51.50 at US$2,749.30 an ounceand the December copper contract was down a penny at US$4.34 a pound.
— With files from The Associated Press
This report by The Canadian Press was first published Oct. 31, 2024.
Companies in this story: (TSX:GSPTSE, TSX:CADUSD)
