Skyscrapers in Toronto’s financial district stand tall on Friday, September 8, 2023. (Photo: The Canadian Press/Andrew Lahodynskyj)
Stock markets in Canada and the U.S. saw a recovery on Tuesday, with technology stocks leading the way after a sharp decline the previous day. Major players like Nvidia and Apple fuelled the tech stocks rebound, pushing indexes higher despite weakness in other sectors.
Tech Surge Lifts Markets
On Monday, several sectors performed well, but losses in tech overshadowed the gains. However, Tuesday brought a complete reversal, said Jules Boudreau, a senior economist at Mackenzie Investments. The S&P/TSX composite index gained 130.30 points, closing at 25,419.45, while Wall Street saw a notable rise. The Dow Jones industrial average climbed 136.77 points to 44,850.35, the S&P 500 added 55.42 points to 6,067.70, and the Nasdaq jumped 391.75 points to 19,733.59.
DeepSeek’s AI Move Shakes Investors
A significant factor in the market turbulence was a Chinese AI startup, DeepSeek, which unveiled a powerful language model. The announcement raised concerns about the level of investment required for AI advancements, putting U.S. tech giants under pressure. Investors are now watching how companies plan to allocate resources toward artificial intelligence.
Shopify Stands Out
While most tech stocks saw sharp declines on Monday before rebounding, Shopify remained steady and surged nearly 10% on Tuesday. Boudreau suggested that mid-sized tech firms like Shopify could benefit the most from the availability of open-source AI, which reduces development costs.
Earnings Season Brings High Expectations
This week, major tech companies are set to release their earnings, with expectations running high. The tech sector has been a major driver of market growth, largely due to AI’s potential profitability. However, Boudreau noted that while companies continue to exceed earnings projections, the pace of growth has been slowing.
Tariff Uncertainty Looms
Trade tariffs remain a major concern as a key February deadline approaches. On Monday, incoming Treasury Secretary Scott Bessent suggested a cautious approach, starting with a 2.5% tariff. However, U.S. President Donald Trump later contradicted him, leaving markets uncertain about the final decision. “We have no idea what we’re going to get,” said Boudreau, highlighting the unpredictability surrounding trade policy.
Rate Decisions on the Horizon
Both Canada and the U.S. are set to make key interest rate decisions on Wednesday. The Bank of Canada is expected to announce a rate cut, while the U.S. Federal Reserve is likely to hold steady. Analysts will be listening closely for any insights from policymakers, especially regarding potential tariff impacts.
Commodities Market Update
The Canadian dollar traded slightly lower at 69.47 cents US, compared to 69.54 cents US on Monday. In commodities, crude oil rose 60 cents to US$73.77 per barrel, while natural gas dropped 13 cents to US$3.12 per mmBTU. Gold surged US$29.10 to US$2,767.50 an ounce, and copper climbed two cents to US$4.25 per pound.
