Wall Street stocks tumbled on Monday, as ongoing fears of artificial intelligence-related disruption and the fallout from Friday’s U.S. Supreme Court ruling sent investors fleeing from high-risk equities.
A broad selloff sent all three major U.S. stock indexes more than 1% lower by the closing bell. Risk appetite was dampened by a combination of persistent fears over potential disruption due to emergent artificial intelligence technology and Trump’s erratic statements on trade policy, which fueled much of the market volatility during the first year of the president’s second term.
The Canadian stock market fared better, thanks in part to a rally in gold prices. The S&P/TSX Composite Index hit a record intraday high at the open before quickly succumbing to selling pressure.
In the U.S., financial stocks were off 3.3%, while software-related firms slid 4.3% amid ongoing AI disruption fears.
“The question about AI is twofold: How much is it going to cost, and who all is going to be disrupted?” said Tom Hainlin, national investment strategist at U.S. Bank Wealth Management in Minneapolis. “You’ve seen the market react to headlines, it’s ’sell first, assess later.’”
He added: “It’s a perspective of what may happen as opposed to what has happened.”
On Friday, the top court in the United States issued a 6-3 ruling that Trump overstepped his presidential authority by enacting reciprocal tariffs under an economic emergency law, a ruling that provoked condemnation from the president, who threatened a 15% temporary tariff on all imports, despite having reached trade agreements with many U.S. trading partners.
Gold prices, benefiting from a flight to safety, surged 2.6%.
“The Supreme Court decision wasn’t unexpected,” Hainlin said. “But you put these uncertainties on top of each other, the heightened geopolitical situation in the Middle East, tariff uncertainty, and potential AI displacement and that’s leading investors to a broad risk reassessment.”
A powerful winter storm buried much of the U.S. under more than 15 inches of snow and paralyzed travel in the Northeast. At airports in the New York City area, 89% to 98% of flights were canceled, according to Flightaware.com. Airlines and travel/leisure-related stocks tumbled 3.8% and 3.7%, respectively. Dow Transports dropped 2.9%.
The Dow Jones Industrial Average fell 821.91 points, or 1.66%, to 48,804.06, the S&P 500 lost 71.76 points, or 1.04%, to 6,837.75 and the Nasdaq Composite lost 258.80 points, or 1.13%, to 22,627.27.
The S&P/TSX Composite Index ended down 41.01 points, or 0.1%, at 33,776.50, after touching a record 33,998.51. On Friday, the index posted a record closing high.
Financials, the most heavily weighted sector on the TSX by far, lost 1.4%.
Canada’s largest banks are expected to report another quarter of strong earnings, supported by strength in their capital markets and wealth management businesses, but slow loan growth and consumer weakness could put pressure on the lenders’ profits. Bank of Nova Scotia will kick off the first-quarter earnings on Tuesday.
“Bank stocks are near all-time highs and susceptible to a pullback,” said Allan Small, senior investment advisor at Allan Small Financial Group with iA Private Wealth. “If earnings are good but not great, you could see a selloff.”
Shares of consumer finance company goeasy Ltd ended 7.8% lower.
Technology was down 3.2% in Toronto, with shares of e-commerce company Shopify Inc falling 7.1%, while industrials declined 1.7%.
Four of the 10 major TSX sectors ended higher.
The materials group, which includes metal mining shares, added 3.4%.
Loblaw said it will invest C$2.4 billion this year to boost its store network and supply chain, and help create about 9,700 jobs related to retail and construction. Shares of the retailer gained 3%, boosting the consumer staples sector which ended 2.4% higher.
Among the 11 major sectors of the S&P 500, financials suffered the biggest percentage, while consumer staples led the gainers.
With only 77 of the companies in the S&P 500 yet to post results, fourth-quarter earnings season has neared the finish line, a smattering of high-profile companies are expected to report this week, most notably vanguard artificial intelligence chipmaker Nvidia due on Wednesday. Home improvement rivals Home Depot and Lowe’s are also on the docket, which is rounded out by Salesforce and Universal Health Services.
Of the companies that have reported, 73% have beaten expectations, and analysts now expect aggregate year-on-year S&P 500 earnings growth of 13.9%, significantly higher than the 8.9% forecast as of January 1, according to LSEG data.
On Monday, the healthcare index advanced 1.2%, boosted by a 4.9% gain in Eli Lilly after rival Novo Nordisk’s obesity drug CagriSema underperformed Eli Lilly’s drug Zepbound in a head-to-head trial.
Among other movers, Domino’s Pizza climbed 4.1% after the fast-food chain’s fourth-quarter same-store sales beat Wall Street estimates.
PayPal jumped 5.8% after Bloomberg News reported that the payments firm is attracting takeover interest.
Declining issues outnumbered advancers by a 2.2-to-1 ratio on the NYSE. There were 390 new highs and 204 new lows on the NYSE. On the Nasdaq, 1,432 stocks rose and 3,277 fell as declining issues outnumbered advancers by a 2.29-to-1 ratio. The S&P 500 posted 41 new 52-week highs and 18 new lows while the Nasdaq Composite recorded 67 new highs and 264 new lows. Volume on U.S. exchanges was 18.39 billion shares, compared with the 20.62 billion average for the full session over the last 20 trading days.
Reuters, Globe staff