The Dow Jones industrials lost more than 1,800 points, nearly 7 per cent, on Thursday as increases in coronavirus cases deflated optimism that the economy could recover quickly from its worst crisis in decades.
The pullback Thursday comes after the market has been screeching higher for more than two months at a pace that many skeptics say was overdone and didn’t reflect the dire state of the economy.
A day earlier, the Federal Reserve said the road back to recovery would be long.
5:49 Can Canada handle a 2nd wave of COVID-19?
Can Canada handle a 2nd wave of COVID-19?
Canada’s main stock index was also down, dropping more than 400 points at 15,254.49.
Story continues below advertisement
The selling comes as coronavirus cases rise in the U.S., with some of the increase likely tied to the reopening of businesses and the lifting of stay-at-home orders. The number of cases is increasing in nearly half the states, according to an Associated Press analysis, a worrying trend that could intensify as people return to work and venture out during the summer.
Investor optimism for a speedy recovery in the economy was also dimmed by the Federal Reserve, which warned Wednesday that the road to recovery from the worst downturn in decades would be long and vowed to keep rates low for the foreseeable future.
Those factors, along with the recent run-up in stock prices, set the stage for the wave of selling Thursday, said Sal Bruno, chief investment officer at IndexIQ.
“It’s not surprising to see a bit of a sell-off, given the furious rally we’ve had coming out of the lows, despite the fact that the economy was not doing great,” Bruno said.
“The fact that (the Fed) is talking about keeping interest rates this low through 2022 is a little eye-opening for a lot of folks.”
The S&P 500 plunged 5.9 per cent to 3,022 points. The Nasdaq composite, which rose above 10,000 for the first time a day earlier, slid 5.3 per cent.
Story continues below advertisement
Small company stocks continued to bear the brunt of the selling, a signal that investors are becoming more pessimistic about a broad recovery in the economy. The Russell 2000 index lost 7.5 per cent.
0:48 Sewage can warn of coronavirus second wave: expert
Sewage can warn of coronavirus second wave: expert
European and Asian markets also fell.
Bond yields fell sharply, a sign of increasing caution among investors. The price of oil also dropped 8 per cent as investors again worried that a slumping economy would need less energy.
Nearly all of the companies in the S&P 500 were down. Technology, financial, industrial and health care stocks accounted for much of the market’s broad slide. Energy stocks were the biggest losers as crude oil prices fell sharply.
Bond yields fell and the price of gold surged as worried investors shifted money into the traditional safe-haven assets.
Story continues below advertisement
Emergency rescue efforts by the Fed and Congress helped arrest the market’s staggering 34 per cent skid in February and March. Since then, the market had been riding a wave of investor optimism that the economy will bounce back by the end of the year, if not sooner, as businesses reopen and people go back to work.
But confidence in that scenario is waning as infections and fatalities continue to climb in the U.S. and elsewhere.
Investors are still waiting for more data to see whether the spike in COVID-19 cases is a sign of a possible second wave of the infection, said Charlie Ripley, senior investment strategist for Allianz Investment Management.
“We think the recovery is largely underway, but there is still some considerable uncertainty on the path we have ahead,” Ripley said. “If we see some more follow-on of people coming back to work and consumer sentiment picking up, that will be a positive sign for a faster recovery.”
— With files from the Canadian Press and a file from Erica Alini at Global News
TOKYO (AP) — Japanese technology group SoftBank swung back to profitability in the July-September quarter, boosted by positive results in its Vision Fund investments.
Tokyo-based SoftBank Group Corp. reported Tuesday a fiscal second quarter profit of nearly 1.18 trillion yen ($7.7 billion), compared with a 931 billion yen loss in the year-earlier period.
Quarterly sales edged up about 6% to nearly 1.77 trillion yen ($11.5 billion).
SoftBank credited income from royalties and licensing related to its holdings in Arm, a computer chip-designing company, whose business spans smartphones, data centers, networking equipment, automotive, consumer electronic devices, and AI applications.
The results were also helped by the absence of losses related to SoftBank’s investment in office-space sharing venture WeWork, which hit the previous fiscal year.
WeWork, which filed for Chapter 11 bankruptcy protection in 2023, emerged from Chapter 11 in June.
SoftBank has benefitted in recent months from rising share prices in some investment, such as U.S.-based e-commerce company Coupang, Chinese mobility provider DiDi Global and Bytedance, the Chinese developer of TikTok.
SoftBank’s financial results tend to swing wildly, partly because of its sprawling investment portfolio that includes search engine Yahoo, Chinese retailer Alibaba, and artificial intelligence company Nvidia.
SoftBank makes investments in a variety of companies that it groups together in a series of Vision Funds.
The company’s founder, Masayoshi Son, is a pioneer in technology investment in Japan. SoftBank Group does not give earnings forecasts.
Shopify Inc. executives brushed off concerns that incoming U.S. President Donald Trump will be a major detriment to many of the company’s merchants.
“There’s nothing in what we’ve heard from Trump, nor would there have been anything from (Democratic candidate) Kamala (Harris), which we think impacts the overall state of new business formation and entrepreneurship,” Shopify’s chief financial officer Jeff Hoffmeister told analysts on a call Tuesday.
“We still feel really good about all the merchants out there, all the entrepreneurs that want to start new businesses and that’s obviously not going to change with the administration.”
Hoffmeister’s comments come a week after Trump, a Republican businessman, trounced Harris in an election that will soon return him to the Oval Office.
On the campaign trail, he threatened to impose tariffs of 60 per cent on imports from China and roughly 10 per cent to 20 per cent on goods from all other countries.
If the president-elect makes good on the promise, many worry the cost of operating will soar for companies, including customers of Shopify, which sells e-commerce software to small businesses but also brands as big as Kylie Cosmetics and Victoria’s Secret.
These merchants may feel they have no choice but to pass on the increases to customers, perhaps sparking more inflation.
If Trump’s tariffs do come to fruition, Shopify’s president Harley Finkelstein pointed out China is “not a huge area” for Shopify.
However, “we can’t anticipate what every presidential administration is going to do,” he cautioned.
He likened the uncertainty facing the business community to the COVID-19 pandemic where Shopify had to help companies migrate online.
“Our job is no matter what comes the way of our merchants, we provide them with tools and service and support for them to navigate it really well,” he said.
Finkelstein was questioned about the forthcoming U.S. leadership change on a call meant to delve into Shopify’s latest earnings, which sent shares soaring 27 per cent to $158.63 shortly after Tuesday’s market open.
The Ottawa-based company, which keeps its books in U.S. dollars, reported US$828 million in net income for its third quarter, up from US$718 million in the same quarter last year, as its revenue rose 26 per cent.
Revenue for the period ended Sept. 30 totalled US$2.16 billion, up from US$1.71 billion a year earlier.
Subscription solutions revenue reached US$610 million, up from US$486 million in the same quarter last year.
Merchant solutions revenue amounted to US$1.55 billion, up from US$1.23 billion.
Shopify’s net income excluding the impact of equity investments totalled US$344 million for the quarter, up from US$173 million in the same quarter last year.
Daniel Chan, a TD Cowen analyst, said the results show Shopify has a leadership position in the e-commerce world and “a continued ability to gain market share.”
In its outlook for its fourth quarter of 2024, the company said it expects revenue to grow at a mid-to-high-twenties percentage rate on a year-over-year basis.
“Q4 guidance suggests Shopify will finish the year strong, with better-than-expected revenue growth and operating margin,” Chan pointed out in a note to investors.
This report by The Canadian Press was first published Nov. 12, 2024.
TORONTO – RioCan Real Estate Investment Trust says it has cut almost 10 per cent of its staff as it deals with a slowdown in the condo market and overall pushes for greater efficiency.
The company says the cuts, which amount to around 60 employees based on its last annual filing, will mean about $9 million in restructuring charges and should translate to about $8 million in annualized cash savings.
The job cuts come as RioCan and others scale back condo development plans as the market softens, but chief executive Jonathan Gitlin says the reductions were from a companywide efficiency effort.
RioCan says it doesn’t plan to start any new construction of mixed-use properties this year and well into 2025 as it adjusts to the shifting market demand.
The company reported a net income of $96.9 million in the third quarter, up from a loss of $73.5 million last year, as it saw a $159 million boost from a favourable change in the fair value of investment properties.
RioCan reported what it says is a record-breaking 97.8 per cent occupancy rate in the quarter including retail committed occupancy of 98.6 per cent.
This report by The Canadian Press was first published Nov. 12, 2024.
