Stock markets around the world fell on Thursday as investors faced up to the prospect of persistent high inflation, and much higher borrowing costs to fight it.
The Toronto Stock Exchange main index closed just shy of 20,700, down by almost 500 points or 2.3 per cent with every sector on the benchmark Canadian stock market lower on the day.
Shares in Ottawa-based e-commerce giant Shopify led the way down, losing 14 per cent of their value on the day. The company, which reports in U.S. dollars, announced before markets opened that it lost $1.5 billion US in the first quarter. That’s a reversal from a profit of $1.3 billion US in the same period a year ago.
At one point in the pandemic, Shopify was the most valuable company in Canada, worth more than $200 billion. Today it’s worth about a quarter of that peak, as the company that saw demand for its services explode during the pandemic is now dealing with slowing revenues.
“Easing lockdowns are driving higher consumer spending on in-store retail, services and travelling,” said Daniel Chan, an analyst with TD Bank who covers the company. “These shifting spending patterns are a headwind for Shopify.”
The sell-off was worse in New York, with the Dow Jones Industrial Average off by more than 1,000 points or more than three per cent, and the technology-heavy Nasdaq faring worst of all, down by more than 600 points or five per cent.
Tech stocks hit hardest
Former high-flying tech stocks like Apple, Microsoft, Amazon, Google and Tesla were down by between four and seven per cent on the day.
“Large-cap technology, media and telecom stocks are deflating from their pandemic-bubble peak, but the group still has more air to lose amid rising interest rates and cooling growth expectations,” said Gina Martin Adams, chief equity strategist at Bloomberg Intelligence.
The gloomy mood came on the heels of the decision by the U.S. central bank to raise its interest rate on Wednesday, its biggest single move upwards in 22 years.
That will increase the cost of borrowing, which is bad news for companies and the stock investors looking to buy them. The Bank of England also raised its lending rate on Thursday and warned of “stagflation” to come, which is when an economy is dealing with high inflation, but also slow growth.
Brenda O’Connor-Juanas, a senior vice-president with UBS based in Miami, told CBC News on Thursday that investors are reacting to a deluge of worrisome news, from supply chain issues to the ongoing pandemic and uncertainty in Ukraine.
“The markets right now in general are just responding and reacting to every negative headline,” she said.
“There is just so much uncertainty about inflation and about rates … we’re just going to see the markets move around a lot like this,” she said. “Volatility is here to stay.”
John Zechner, chair of Toronto-based investment firm J Zechner Associates, says the sell-off is happening because investors are realizing that lending rates are going to have to get a lot more expensive and quickly, in order to get inflation under control.
“The punch is being pulled away,” he said in an interview Friday. “Free money has sustained this bull market for the last 12 years effectively, and we’re probably seeing the most aggressive move away from free money that we’ve seen in over 20 years.”
“The only way to tame inflation is to is to try to slow down growth or tighten the economy a little,” Zechner said. “And one of the casualties is the stock market.”
The value of bitcoin, which has been trumpeted as a hedge against inflation, slumped along with everything else, losing about 6 per cent or more than $3,000 to change hands below $37,000 US. That’s half what the world’s biggest cryptocurrency was worth in November, and its lowest level since January.
Other cryptocurrencies joined in the sell-off as investors pulled out their cash from the volatile sector and parked it in assets deemed to be safer.
Globally, $120 million US was pulled out of cryptocurrencies in the week up to May 5, according to data from digital investing firm Coinshares. Over the past month, the total jumps to $339 million US.
TORONTO – Cineplex Inc. reported a loss in its latest quarter compared with a profit a year ago as it was hit by a fine for deceptive marketing practices imposed by the Competition Tribunal.
The movie theatre company says it lost $24.7 million or 39 cents per diluted share for the quarter ended Sept. 30 compared with a profit of $29.7 million or 40 cents per diluted share a year earlier.
The results in the most recent quarter included a $39.2-million provision related to the Competition Tribunal decision, which Cineplex is appealing.
The Competition Bureau accused the company of misleading theatregoers by not immediately presenting them with the full price of a movie ticket when they purchased seats online, a view the company has rejected.
Revenue for the quarter totalled $395.6 million, down from $414.5 million in the same quarter last year, while theatre attendance totalled 13.3 million for the quarter compared with nearly 15.7 million a year earlier.
Box office revenue per patron in the quarter climbed to $13.19 compared with $12 in the same quarter last year, while concession revenue per patron amounted to $9.85, up from $8.44 a year ago.
This report by The Canadian Press was first published Nov. 6, 2024.
TORONTO – Restaurant Brands International Inc. reported net income of US$357 million for its third quarter, down from US$364 million in the same quarter last year.
The company, which keeps its books in U.S. dollars, says its profit amounted to 79 cents US per diluted share for the quarter ended Sept. 30 compared with 79 cents US per diluted share a year earlier.
Revenue for the parent company of Tim Hortons, Burger King, Popeyes and Firehouse Subs, totalled US$2.29 billion, up from US$1.84 billion in the same quarter last year.
Consolidated comparable sales were up 0.3 per cent.
On an adjusted basis, Restaurant Brands says it earned 93 cents US per diluted share in its latest quarter, up from an adjusted profit of 90 cents US per diluted share a year earlier.
The average analyst estimate had been for a profit of 95 cents US per share, according to LSEG Data & Analytics.
This report by The Canadian Press was first published Nov. 5, 2024.
ST. JOHN’S, N.L. – Fortis Inc. reported a third-quarter profit of $420 million, up from $394 million in the same quarter last year.
The electric and gas utility says the profit amounted to 85 cents per share for the quarter ended Sept. 30, up from 81 cents per share a year earlier.
Fortis says the increase was driven by rate base growth across its utilities, and strong earnings in Arizona largely reflecting new customer rates at Tucson Electric Power.
Revenue in the quarter totalled $2.77 billion, up from $2.72 billion in the same quarter last year.
On an adjusted basis, Fortis says it earned 85 cents per share in its latest quarter, up from an adjusted profit of 84 cents per share in the third quarter of 2023.
The average analyst estimate had been for a profit of 82 cents per share, according to LSEG Data & Analytics.
This report by The Canadian Press was first published Nov. 5, 2024.
