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TSX posts biggest loss since 2020 as inflation fears settle in – CBC News

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The Toronto Stock Exchange had its worst day in more than two years on Thursday as investors faced the reality of sharply higher interest rates to bring down stubbornly high inflation.

The benchmark Canadian stock index lost 618 points to close below 19,000 for the first time since April 2021. In percentage terms, it was the worst day for Canada’s stock market in two years.

The TSX followed the lead of stock markets around the world, which fell in unison after the Federal Reserve raised its trend-setting interest rate by 75 basis points on Wednesday, it’s biggest single hike in 26 years.

The Swiss National Bank and the Bank of England followed suit on Thursday, raising their lending rates in an attempt to cool down overheated economies.

“The market is digesting what 75 points means and asking, can the Fed continue this aggressive cycle without triggering a recession?” said Brenda O’Connor-Juanas, a senior vice-president with investment banking firm UBS.

Super-sized hike expected in Canada

After hiking three times this year to raise its rate from 0.25 per cent as recently as March to 1.5 per cent now, investors are expecting the Bank of Canada will announce a super-sized rate hike of its own next month, bringing its rate to 2.25 per cent, a level not seen since before the financial crisis in 2009.

Stubborn inflation has sent a chill through stock markets recently as investors realize persistent higher prices will be a drag on profits as consumers are forced to find ways to cut back.

“We have an overheated economy and there’s only one way to cool it off, and it’s going to be painful,” O’Connor-Juanas told CBC News in an interview.

All 11 sub-indexes of the TSX were lower, from energy to banking, and from health care to technology.

NYSE trader Peter Tuchman, known for his Wall Street-themed hats, wears one in November 2020 when the Dow Jones was poised to hit 30,000 points for the first time ever. The U.S. stock index broke through that barrier again on Thursday, in the other direction. (Brendan McDermid/Reuters)

Things were even worse on Wall Street, where the Dow Jones Industrial Average lost 700 points or more than three per cent to dip below the 30,000 level for the first time since January of 2021. 

“Those are psychological barriers,” said Anthony Scilipoti, CEO of Toronto-based Veritas Investment Research. “The problem with selling is that it begets selling.”

The broader S&P 500 had its worst day since September 2020, losing 123 points or more than three per cent.

Both the S&P and the technology-focused Nasdaq have both officially entered into bear markets, which means they have declined by 20 per cent or more from the peak.

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Netflix’s subscriber growth slows as gains from password-sharing crackdown subside

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Netflix on Thursday reported that its subscriber growth slowed dramatically during the summer, a sign the huge gains from the video-streaming service’s crackdown on freeloading viewers is tapering off.

The 5.1 million subscribers that Netflix added during the July-September period represented a 42% decline from the total gained during the same time last year. Even so, the company’s revenue and profit rose at a faster pace than analysts had projected, according to FactSet Research.

Netflix ended September with 282.7 million worldwide subscribers — far more than any other streaming service.

The Los Gatos, California, company earned $2.36 billion, or $5.40 per share, a 41% increase from the same time last year. Revenue climbed 15% from a year ago to $9.82 billion. Netflix management predicted the company’s revenue will rise at the same 15% year-over-year pace during the October-December period, slightly than better than analysts have been expecting.

The strong financial performance in the past quarter coupled with the upbeat forecast eclipsed any worries about slowing subscriber growth. Netflix’s stock price surged nearly 4% in extended trading after the numbers came out, building upon a more than 40% increase in the company’s shares so far this year.

The past quarter’s subscriber gains were the lowest posted in any three-month period since the beginning of last year. That drop-off indicates Netflix is shifting to a new phase after reaping the benefits from a ban on the once-rampant practice of sharing account passwords that enabled an estimated 100 million people watch its popular service without paying for it.

The crackdown, triggered by a rare loss of subscribers coming out of the pandemic in 2022, helped Netflix add 57 million subscribers from June 2022 through this June — an average of more than 7 million per quarter, while many of its industry rivals have been struggling as households curbed their discretionary spending.

Netflix’s gains also were propelled by a low-priced version of its service that included commercials for the first time in its history. The company still is only getting a small fraction of its revenue from the 2-year-old advertising push, but Netflix is intensifying its focus on that segment of its business to help boost its profits.

In a letter to shareholder, Netflix reiterated previous cautionary notes about its expansion into advertising, though the low-priced option including commercials has become its fastest growing segment.

“We have much more work to do improving our offering for advertisers, which will be a priority over the next few years,” Netflix management wrote in the letter.

As part of its evolution, Netflix has been increasingly supplementing its lineup of scripted TV series and movies with live programming, such as a Labor Day spectacle featuring renowned glutton Joey Chestnut setting a world record for gorging on hot dogs in a showdown with his longtime nemesis Takeru Kobayashi.

Netflix will be trying to attract more viewer during the current quarter with a Nov. 15 fight pitting former heavyweight champion Mike Tyson against Jake Paul, a YouTube sensation turned boxer, and two National Football League games on Christmas Day.

The Canadian Press. All rights reserved.

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