NEW YORK (AP) — Wall Street tumbled Tuesday to its worst day in a month on worries about the strength of corporate profits and the economy following some mixed reports.
The S&P 500 fell 1.6% to break out of a weekslong lull. The Dow Jones Industrial Average dropped nearly 345 points, or 1%, while the Nasdaq composite sank 2%.
First Republic Bank had the biggest loss in the S&P 500 by far, and its stock nearly halved after it said customers withdrew more than $100 billion during the first three months of the year. That doesn’t include $30 billion in deposits that big banks plugged in to build faith in their rival after the second- and third-largest U.S. bank failures in history shook confidence.
The size of the drop in deposits renewed worries about the U.S. banking system and the risk of an economy-sapping pullback in lending. That overshadowed First Republic’s beating analysts’ expectations for earnings, and its stock plunged 49.4%.
The majority of companies so far this reporting season have been topping expectations, but the bar was set considerably low. Analysts are forecasting the worst drop in S&P 500 earnings since the spring of 2020, when the pandemic froze the global economy. That’s why Wall Street is focused just as much, if not more, on what companies say about their future prospects as they do about their past three months.
WHY UPS WAS LOWER
UPS fell 10% after it met profit forecasts but said it made less in revenue than expected. It also said its revenue for the full year will likely come at the low end of its prior forecast, citing a challenging economy and other factors.
Danaher was another big weight on the market, falling 8.8% despite reporting better earnings and revenue than expected. Analysts pointed to its trimming back its forecast for a key revenue measure over the course of the year.
On the winning side, PepsiCo rose 2.3% after beating profit expectations. Homebuilder PulteGroup rose 1.7% after also topping forecasts.
TECH EARNINGS
The heart of earnings reporting season is approaching, and more heavy hitters arrived after trading closed for the day.
Microsoft and Google’s parent company, Alphabet, both rose in afterhours trading after reporting profits above expectations. Because they’re two of the biggest companies on Wall Street by market value, their stock movements carry extra weight on the S&P 500 and other market indexes.
Broad stock indexes had been making only modest moves so far this earnings reporting season. The S&P 500 barely budged last week and ticked up just 0.1% on Monday. But volatility strategists at Barclays said the calm was unlikely to last for the long term.
The economy is under stress from high interest rates meant to get inflation under control. High rates can stifle inflation, but only by putting the brakes on the entire economy and hurting investment prices. Big chunks of the economy outside the job market have already begun to slow or contract.
With so much uncertainty about whether inflation can return to the Federal Reserve’s target without causing a recession, “we remain skeptical that markets are out of the woods,” Barclays strategists led by Stefano Pascale said in a report. They also pointed to “the risk of something breaking” in the financial system because of high rates.
ECONOMY WORRIES
A report on Tuesday showed that confidence among consumers fell more sharply in April than expected, down to its lowest level since July. That’s a discouraging signal when consumer spending makes up the biggest part of the U.S. economy.
A separate report was more encouraging, saying sales of new homes rose by more than expected. The housing industry has been under pressure because higher mortgage rates are squeezing buyers.
On Thursday, the U.S. will give its first estimate of how much the economy grew during the first three months of the year. Economists expect to see growth cooled to a 1.9% annual rate, down from 2.6% at the end of 2022.
Much of the slowdown is due to the Fed’s barrage of hikes to interest rates over the last year. The Federal Reserve meets next week, and much of Wall Street expects it to raise interest rates at least one more time before pausing.
Beyond higher interest rates, Wall Street is also worried that the struggles of the U.S. banking industry could tighten the brakes even further on the economy. First Republic said its deposits have stabilized since late March, but it’s still working to cut expenses. If it and other banks pull back on lending, it could lead to lower growth across the economy.
All told, the S&P 500 fell 65.41 points to 4,071.63. The Dow dropped 344.57 to 33,530.83, and the Nasdaq fell 238.05 to 11,799.16.
In the bond market, the yield on the 10-year Treasury fell to 3.39% from 3.50% late Monday. It helps set rates for mortgages and other important loans.
The two-year yield, which moves more on expectations for Fed action, fell to 3.95% from 4.11%.
In markets overseas, stock indexes closed mostly lower in Europe and were mixed across Asia overnight.
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AP Business Writers Joe McDonald and Matt Ott contributed.
OTTAWA – Canada’s unemployment rate held steady at 6.5 per cent last month as hiring remained weak across the economy.
Statistics Canada’s labour force survey on Friday said employment rose by a modest 15,000 jobs in October.
Business, building and support services saw the largest gain in employment.
Meanwhile, finance, insurance, real estate, rental and leasing experienced the largest decline.
Many economists see weakness in the job market continuing in the short term, before the Bank of Canada’s interest rate cuts spark a rebound in economic growth next year.
Despite ongoing softness in the labour market, however, strong wage growth has raged on in Canada. Average hourly wages in October grew 4.9 per cent from a year ago, reaching $35.76.
Friday’s report also shed some light on the financial health of households.
According to the agency, 28.8 per cent of Canadians aged 15 or older were living in a household that had difficulty meeting financial needs – like food and housing – in the previous four weeks.
That was down from 33.1 per cent in October 2023 and 35.5 per cent in October 2022, but still above the 20.4 per cent figure recorded in October 2020.
People living in a rented home were more likely to report difficulty meeting financial needs, with nearly four in 10 reporting that was the case.
That compares with just under a quarter of those living in an owned home by a household member.
Immigrants were also more likely to report facing financial strain last month, with about four out of 10 immigrants who landed in the last year doing so.
That compares with about three in 10 more established immigrants and one in four of people born in Canada.
This report by The Canadian Press was first published Nov. 8, 2024.
The Canadian Institute for Health Information says health-care spending in Canada is projected to reach a new high in 2024.
The annual report released Thursday says total health spending is expected to hit $372 billion, or $9,054 per Canadian.
CIHI’s national analysis predicts expenditures will rise by 5.7 per cent in 2024, compared to 4.5 per cent in 2023 and 1.7 per cent in 2022.
This year’s health spending is estimated to represent 12.4 per cent of Canada’s gross domestic product. Excluding two years of the pandemic, it would be the highest ratio in the country’s history.
While it’s not unusual for health expenditures to outpace economic growth, the report says this could be the case for the next several years due to Canada’s growing population and its aging demographic.
Canada’s per capita spending on health care in 2022 was among the highest in the world, but still less than countries such as the United States and Sweden.
The report notes that the Canadian dental and pharmacare plans could push health-care spending even further as more people who previously couldn’t afford these services start using them.
This report by The Canadian Press was first published Nov. 7, 2024.
Canadian Press health coverage receives support through a partnership with the Canadian Medical Association. CP is solely responsible for this content.
As Canadians wake up to news that Donald Trump will return to the White House, the president-elect’s protectionist stance is casting a spotlight on what effect his second term will have on Canada-U.S. economic ties.
Some Canadian business leaders have expressed worry over Trump’s promise to introduce a universal 10 per cent tariff on all American imports.
A Canadian Chamber of Commerce report released last month suggested those tariffs would shrink the Canadian economy, resulting in around $30 billion per year in economic costs.
More than 77 per cent of Canadian exports go to the U.S.
Canada’s manufacturing sector faces the biggest risk should Trump push forward on imposing broad tariffs, said Canadian Manufacturers and Exporters president and CEO Dennis Darby. He said the sector is the “most trade-exposed” within Canada.
“It’s in the U.S.’s best interest, it’s in our best interest, but most importantly for consumers across North America, that we’re able to trade goods, materials, ingredients, as we have under the trade agreements,” Darby said in an interview.
“It’s a more complex or complicated outcome than it would have been with the Democrats, but we’ve had to deal with this before and we’re going to do our best to deal with it again.”
American economists have also warned Trump’s plan could cause inflation and possibly a recession, which could have ripple effects in Canada.
It’s consumers who will ultimately feel the burden of any inflationary effect caused by broad tariffs, said Darby.
“A tariff tends to raise costs, and it ultimately raises prices, so that’s something that we have to be prepared for,” he said.
“It could tilt production mandates. A tariff makes goods more expensive, but on the same token, it also will make inputs for the U.S. more expensive.”
A report last month by TD economist Marc Ercolao said research shows a full-scale implementation of Trump’s tariff plan could lead to a near-five per cent reduction in Canadian export volumes to the U.S. by early-2027, relative to current baseline forecasts.
Retaliation by Canada would also increase costs for domestic producers, and push import volumes lower in the process.
“Slowing import activity mitigates some of the negative net trade impact on total GDP enough to avoid a technical recession, but still produces a period of extended stagnation through 2025 and 2026,” Ercolao said.
Since the Canada-United States-Mexico Agreement came into effect in 2020, trade between Canada and the U.S. has surged by 46 per cent, according to the Toronto Region Board of Trade.
With that deal is up for review in 2026, Canadian Chamber of Commerce president and CEO Candace Laing said the Canadian government “must collaborate effectively with the Trump administration to preserve and strengthen our bilateral economic partnership.”
“With an impressive $3.6 billion in daily trade, Canada and the United States are each other’s closest international partners. The secure and efficient flow of goods and people across our border … remains essential for the economies of both countries,” she said in a statement.
“By resisting tariffs and trade barriers that will only raise prices and hurt consumers in both countries, Canada and the United States can strengthen resilient cross-border supply chains that enhance our shared economic security.”
This report by The Canadian Press was first published Nov. 6, 2024.
