TORONTO — Canada's main stock index fell more than 200 points on Friday, while U.S. markets also fell, after the latest reports on the labour market showed continued softening on both sides of the border.
Markets retreated broadly on Friday, though tech stocks led the way, said Kathrin Forrest, equity investment specialist at Capital Group.
“Pretty much all the Magnificent Seven retreated, although to varying degrees,” said Forrest, adding the day “caps a pretty bumpy first week of September.”
The S&P/TSX composite index closed down 206.85 points, or 0.9 per cent, at 22,781.43.
In New York, the Dow Jones industrial average was down 410.34 points, or one per cent, at 40,345.41. The S&P 500 index was down 94.99 points, or 1.7 per cent, at 5,408.42, while the Nasdaq composite was down 436.83 points, or 2.6 per cent, at 16,690.83.
The highly anticipated jobs report in the U.S. found that employers hired fewer workers in August than expected for the second straight month.
The past week saw a “sequence” of economic data releases pointing to softening in the economy, Forrest said.
The market is wrestling with the question of whether the economy is moderating as it should under the weight of interest rate hikes or whether the U.S. Federal Reserve has waited too long to start cutting, said Forrest.
But the data still points to a soft landing, she said.
Inflation has slowed and policymakers have turned their attention to the jobs market, and the Fed is widely expected to start cutting this month.
Whether the cut will be 25 basis points or 50 basis points is “pretty much a toss-up,” said Forrest, but what’s more important is how much the Fed will cut over a longer period of time.
Right now markets are betting on just over eight cuts by May, and Forrest thinks that’s a little bit too aggressive.
“If we assume a soft landing, which seems to be implied by the current economic data, eight rate cuts seems relatively quick in terms of policies.”
With tech leading the way lower Friday, Forrest said there continues to be extra volatility in that sector as companies involved with artificial intelligence have attracted a lot of investor interest but also more recently concerns about the pace of capital expenditure.
However, she noted that recent earnings by those companies have been “largely constructive.”
In Canada, it was also jobs day — the latest report showed the unemployment rate climbed in August while the economy added 22,000 jobs.
The Bank of Canada cut rates for the third time earlier this week. North of the border the economic picture is “not quite as constructive” as it is in the U.S., said Forrest.
“We've heard from the Bank of Canada at the past few meetings that they now see the economy in excess supply, and that includes the labour market,” she said.
The Canadian dollar traded for 73.83 cents US compared with 74.00 cents US on Thursday.
The October crude oil contract was down US$1.48 at US$67.67 per barrel and the October natural gas contract was up three cents at US$2.28 per mmBTU.
The December gold contract was down US$18.50 at US$2,524.60 an ounce and the December copper contract was down seven cents at US$4.07 a pound.
— With files from The Associated Press
This report by The Canadian Press was first published Sept. 6, 2024.
Companies in this story: (TSX:GSPTSE, TSX:CADUSD)
Rosa Saba, The Canadian Press
