TORONTO – Weakness in industrial, technology, and battery metals sectors led to a slide in Canada’s main stock index on Thursday, while U.S. markets also witnessed losses in technology.Thank you for reading this post, don't forget to subscribe!
The S&P/TSX composite index closed at 18,875.31, down 72.54 points.
In New York, the Dow Jones Industrial Average fell 251.63 points to 32,784.30, and the S&P 500 index dropped 49.54 points to 4,137.23, while the Nasdaq Composite decreased by 225.62 points to 12,595.61.
“Today is a risk-off day,” stated Philip Pettersson, IG Wealth Management’s chief investment strategist.
According to Pettersson, many major American companies are monitoring the market after the release of their earnings reports.
On Wednesday, Facebook owner Meta reported better-than-expected profit after the bell, but on Thursday, it mentioned a decline in advertising due to the Israel-Hamas war, leading to revenue forecasts that were wider than analysts’ expectations. This caused a 3.73 percent drop in the share price of Facebook.
Similarly, Alphabet’s share price also declined on Wednesday, despite beating profit estimates.
Pettersson emphasized that investors are responding more to companies’ outlook rather than actual data. Since Meta and Alphabet’s revenues heavily rely on advertising, any indication of softer revenues in the future could suggest a weak economic outlook.
However, Pettersson stated that risk appetite across the market has diminished amid competitive outlooks for the future. While major companies are reporting weak revenues, the GDP report released on Thursday reaffirmed confidence in the US economy, revealing a 4.9 percent growth in the third quarter due to strong consumer spending.
Regarding the upcoming rate decision of the US Federal Reserve, Pettersson expects the central bank to maintain stability but mentioned that an additional hike is possible depending on future decisions.
“At this point, I believe the Fed is slightly more comfortable regarding inflation. The Federal Reserve’s patience will be the determining factor,” Pettersson said.
“In the next few meetings, they may convey that the US economy can handle further rate increases to combat inflation.”
Meanwhile, Pettersson stated that a rate hike in Canada is highly likely. The Bank of Canada recently announced that it is maintaining its key rate.
The Canadian dollar traded at 72.33 cents US, compared to 72.56 cents US on Wednesday.
On Thursday, oil prices continued to decline due to ongoing volatility. Crude oil prices are being influenced by two opposing factors: supply and demand fundamentals pushing prices higher, and economic uncertainty and conflict in the Middle East weighing on prices, explained Peterson.
The December crude oil contract dropped by US$2.18 to US$83.21 per barrel, while the December natural gas contract increased by 10 cents to US$3.48 per mmBtu.
In the commodities market, the December gold contract rose by US$2.50 to US$1,997.40 per ounce, and the December copper contract decreased by a penny to US$3.58 per pound.
– With files from The Associated Press
This report by The Canadian Press was first published on Oct. 26, 2023.
Companies in this story: (TSX:GSPTSE, TSX:CADUSD)
Rosa Saba, The Canadian Press