Canada’s main stock index fell sharply on Thursday as investors worried about artificial intelligence disruption and the potential for fewer Federal Reserve interest rate cuts than previously hoped, with industrial and metal mining shares leading the declines.
The S&P/TSX composite index ended down 788.91 points, or 2.4%, at 32,465.28, marking its second straight day of losses after posting a record closing high on Tuesday.
Wall Street’s main indexes also lost ground as investors intensified their selloff of technology shares and fled transport stocks amid worries about artificial intelligence disruption.
“We’ve seen the market go up pretty steadily for the last while,” said Michael Sprung, president at Sprung Investment Management. “But it’s getting to point where people are beginning to have some questions and amongst them are trying to separate what are going to be the artificial intelligence winners and who are going to be the losers.”
Some of the optimism associated with stronger-than-expected U.S. employment data on Wednesday faded.
“With that kind of a positive reading, it’s caused people to contemplate that (interest) rate cuts are not imminent just at this point in time,” Sprung said.
Dampened Federal Reserve rate cut hopes weighed on precious metal prices. Gold dropped 3%, while the materials group, which includes metal mining shares, ended 5.9% lower. Energy also lost ground, falling 1.7%, as the price of oil settled 2.8% lower at US$62.84 a barrel on the prospect of slowing demand.
Why gold prices took such a sudden dive on Thursday
Shares of Mullen Group Ltd tumbled 8.9% after the logistics company missed quarterly earnings estimates. That weighed on the industrials sector, which lost 4%.
Technology fell 3.7% in Toronto, with shares of e-commerce company Shopify Inc ending 6.1% lower. Heavily weighted financials were down 0.9%.
Sun Life Financial Inc shares added 6.3% after quarterly earnings beat estimates but shares of Manulife Financial were down 5.3% after the company reported a lower quarterly profit.
Defensive sectors helped limit overall declines, with utilities and consumer staples posting gains.
The S&P 500 sank 1.6% for its second-worst day since Thanksgiving, though it’s still near its all-time high set late last month. The Dow Jones Industrial Average dropped 669 points, or 1.3%, and the Nasdaq composite fell 2%.
After starting the day higher, U.S. equity indexes turned negative as investors fled riskier sectors and placed more defensive bets such as utilities, consumer staples and real estate.
At a time when investors have been stressed about the impact AI would have on competition, a less-than-impressive quarterly update from Cisco Systems helped to sour the market on technology stocks broadly. Cisco closed down 12.3%.
Transportation companies also got caught up in worries about AI disruption. The Dow Jones Transport Average lost 4% with CH Robinson, Landstar and Expeditors International shares tumbling. CNBC reported that a new tool from AI company Algorhythm Holdings made trucking companies the latest target of investor worries about AI disruption.
“There was weakness in the jobs report on transportation hiring,” said Scott Helfstein, head of investment strategy at Global X, referring to Wednesday’s jobs report. “Layer that on top of potential disruption from automation as well as risks of weaker demand.”
Elsewhere, AppLovin lost nearly a fifth of its value and tumbled 19.7%, even though it reported a stronger profit for the latest quarter than analysts expected. Like other software companies, it’s come under pressure from worries that AI may undercut its business while fundamentally changing how people use the internet.
AppLovin CEO Adam Foroughi pushed back on the concerns, saying in a conference call with analysts that indicators show his company is doing well. “There’s a real disconnect between market sentiment and the reality of our business,” he said.
Its stock nevertheless widened its loss for the young year so far, which came into the day at 32.2%.
After Wednesday’s stronger-than-expected jobs report fueled worries the Federal Reserve could now be less likely to cut rates, investors braced for the January Consumer Price Index report, due on Friday. Thursday’s data showed the number of Americans filing new applications for unemployment benefits decreased by less than expected last week, likely as disruptions from winter storms lingered.
Reuters, The Associated Press, Globe staff