S&P/TSX Composite Experiences 1.4% Decline; U.S. Markets Follow Suit

TORONTO — On Thursday, Canada's prominent stock index, the S&P/TSX Composite, experienced a drop of 1.4 per cent. This decline was largely attributed to significant losses in the base metals and technology sectors. Meanwhile, U.S. stock markets also faced downturns, as major technology stocks negatively impacted Wall Street.

Kevin Headland, the chief investment strategist at Manulife Investment Management, noted that the earnings reports from tech giants Meta and Microsoft did not meet the high expectations that investors had set. Despite both companies reporting better-than-expected profits, the results fell short of the aggressive forecasts that had been anticipated.

This year, technology stocks have generally performed well, driven by enthusiasm over advancements in artificial intelligence. However, Headland pointed out that the standards continue to rise, leading to a situation where even satisfactory outcomes are deemed insufficient. He commented, "It’s interesting how it’s not about meeting expectations, it’s about beating expectations," further stating that the market is effectively "priced for perfection" when it comes to large tech firms.

As a result, the tech-heavy Nasdaq composite index fell significantly, dropping 512.78 points, or 2.8 per cent, to settle at 18,095.15. In the U.S., the Dow Jones industrial average dropped by 378.08 points, marking a 0.9 per cent decline at 41,763.46. Additionally, the S&P 500 index fell by 108.22 points, or 1.9 per cent, closing at 5,705.45.

The S&P/TSX composite index ended the day down by 350.92 points, bringing it to a total of 24,156.87. Although both Meta and Microsoft's profitability exceeded forecasts, concerns arose regarding Microsoft's cloud computing segment as it did not meet certain expectations. Similarly, worries about Meta's planned investments in AI raised additional red flags among investors.

Headland indicated that market participants are closely analyzing every detail from these earnings reports, leading to an atmosphere of uncertainty. He mentioned, "The expectations kept getting loftier and loftier, and it becomes harder and harder to meet and especially beat those expectations."

Despite the losses attributed to technology stocks on Thursday, Headland remained optimistic, noting that in recent months, the markets have demonstrated improved breadth and depth, which he considers a positive sign.

In the realm of economic indicators, the Personal Consumption Expenditures index, a key measure of inflation monitored by the U.S. Federal Reserve, showed a slow increase to 2.1 per cent in September, aligning with expectations.

On the other hand, Canada's economic performance appeared stagnant in August, and projections for third-quarter GDP suggest it may not reach the Bank of Canada's forecasts. Although slightly below expectations, this development did not come as a major surprise. Headland speculated that there might be future interest rate adjustments, with a potential second supersized cut of half a percentage point if economic weakness continues. He remarked, "I would not be surprised… if I saw another 50-basis-point cut, given inflation is lower than targeted."

As for currency movements, the Canadian dollar remained stable, trading at 71.86 cents U.S., unchanged from the previous day. In commodity markets, the December crude oil contract rose by 65 cents to reach US$69.26 per barrel. Conversely, the December natural gas contract fell by 14 cents to US$2.71 per mmBTU.

In precious metals, the December gold contract saw a decline of US$51.50, finishing at US$2,749.30 an ounce, while the December copper contract dipped by a penny to settle at US$4.34 a pound.

This reporting provides an overview of the current market climate, characterized by mixed indicators and cautious investor sentiment.

stocks, market, technology