At the open: Nasdaq tumbles 3% as tech rout deepens – The Globe and Mail

Canada’s main stock index fell on Tuesday, hurt by a slide in oil prices on coronavirus-led demand worries and a tech-fueled slide on Wall Street.

At 11:19 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was down 74.31 points, or 0.46%, at 16,143.70.

The Bank of Canada will remain in a holding pattern and likely follow the U.S. Federal Reserve’s path of reviewing its current inflation-targeting framework to protect the economy from the fallout of the coronavirus, a Reuters poll showed on Friday.

The energy sector dropped 5.3% as U.S. crude prices were down 7.6% a barrel, while Brent crude lost 5.1%.

The financials sector slipped 1%, while the industrials sector rose 0.4%.

The materials sector, which includes precious and base metals miners and fertilizer companies, gained 0.6%, despite gold prices falling to hit their lowest in nearly two weeks on Tuesday.

Spot gold fell 0.5% at $1,918.60 per ounce after falling as much as 1.2% to $1,906.24. U.S. gold futures eased 0.4% to $1,926.60.

The Nasdaq tumbled on Tuesday as investors dumped high-flying technology stocks, while Tesla tracked its worst day in nearly six months after a surprise exclusion from the S&P 500.

All eleven major S&P sectors fell in early trading, with declines worsening after news on Friday that SoftBank made significant option purchases during the run-up in U.S. stocks.

Financial and information technology stocks were among the biggest decliners.

Still, market participants said they did not expect a prolonged sell-off against the backdrop of an accommodative monetary policy by the Federal Reserve, which last week indicated a higher toleration for inflation rising above 2%.

“I’m not going to throw in the towel here and say the tech run is over,” said Dennis Dick, proprietary trader at Bright Trading LLC in Las Vegas.

“It’s still a healthy correction. We came a long way and it’s time to cool off a little bit.”

Media reports of SoftBank’s option purchases also reminded investors that market makers might have billions of dollars worth of long positions as hedges against options trades, which will have to be sold as prices fall.

“If you bought a lot of call options in the second quarter, you’re doing very well, but that creates a problem for later when you need to unwind these positions,” said Ken Peng, Citi Private Bank’s head of Asia Investment Strategy.

Wall Street’s tech-and-stimulus-led rally halted last week with the Nasdaq falling as much as 9.9% from its record closing high – hit just five days ago – as investors booked profits after a run that boosted the index about 70% from its pandemic-lows.

At session lows on Tuesday, Facebook, Amazon.com , Apple, Tesla, Microsoft, Alphabet and Netflix – together known as “FAATMAN” – collectively lost more than $1 trillion in market capitalization since Sept. 2.

Tesla plunged another 15.1% to a three-week low after the electric-car maker was excluded from a group of companies being added to the S&P 500.

The Dow Jones Industrial Average was down 536.63 points, or 1.91%, at 27,596.68, the S&P 500 was down 70.76 points, or 2.06%, at 3,356.20, and the Nasdaq Composite was down 286.42 points, or 2.53%, at 11,026.72.

Fears over potential U.S. sanctions against China’s biggest chipmaker SMIC hit domestic suppliers, with Applied Materials Inc, Lam Research Corp and KLA Corp dropping between 6.6% and 7.8%.

General Motors Co jumped 7.9% after it acquired an 11% stake, worth $2 billion, in U.S. electric-truck maker Nikola Corp. The truck maker’s shares surged 37.3%.

U.S. President Donald Trump and Democratic rival Joe Biden are set to visit battleground states this week as some opinion polls show the race tightening with less than 60 days to go until the Nov. 3 election.

Reuters

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