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North American stock markets plunge on selloff of technology sector

TORONTO — North American stock markets plunged Thursday, spurred on by a selloff in the overheated technology sector and concerns about the pace of economic recovery.

TORONTO — North American stock markets plunged Thursday, spurred on by a selloff in the overheated technology sector and concerns about the pace of economic recovery.

The decrease should be taken into context given that the tech sector has led markets through the COVID-19 pandemic as companies have thrived as more people work from home or have been house-bound, says Michael Currie, vice-president and investment adviser at TD Wealth.

He says the decline could be the start of a correction but one day doesn't make a trend.

"We've had a real, real long strong upturn in technology so even year-to-date the numbers are really strong. So far it's just a one day dip but it is a pretty good one."

Sixteen Canadian tech stocks were negative with six, including Lightspeed POS Inc., BlackBerry Ltd., and Shopify Inc., plunging more than five per cent on the day.

In the U.S., the so-called FANG stocks — Facebook, Apple, Netflix and Alphabet-owned Google — lost between 3.5 and 7.9 per cent.

The decreases come after analysts voiced concerned about elevated tech valuations despite recent quarterly results being strong.

"I think people want to take some money off the table," Currie said in an interview.

September is historically the worst month of the year, followed by October.

"Usually if you're going to take a profit, this is seasonally a good time to be doing it. And pretty much the only place this year we've seen significant profits has been the gold and mining sector and in tech."

The S&P/TSX composite index closed down 249.07 points at 16,448.90.

In New York, the Dow Jones industrial average was down 807.77 points at 28,292.73. The S&P 500 index was down 125.77 points at 3,455.07, while the Nasdaq composite was down 598.34 points or nearly five per cent at 11,458.10.

The technology sector led the declines, losing 3.9 per cent on the day. Still, the sector is up 27.7 per cent so far in 2020.

"There's got to be a more sustained downturn here before anyone's really feeling any pain in that area," said Currie.

A second day of employment numbers in the U.S. heightened concerns about the pace of the economic recovery despite suggestions about a vaccine coming just before election day.

Initial jobless claims rose by 881,000 but the number of people receiving aid remains high at 29.2 million, up nearly 2.2 million from the prior week.

The results came sandwiched between Wednesday's weak ADP private payrolls and Friday's monthly jobs report.

All 11 major sectors on the TSX fell.

Consumer discretionary was the second worst performer, falling nearly two per cent with auto parts companies Magna International Inc. and Martinrea International Inc. down 3.35 and 3.1 per cent respectively. The decreases came as Ford Motor Co. announced it will post its first full-year loss in a decade.

Materials lost 1.1 per cent with forest products companies leading the declines. Interfor Corp. was down 5.9 per cent and West Fraser Timber Co. Ltd. off 5.6 per cent.

The December gold contract was down US$6.90 at US$1,937.80 an ounce and the December copper contract was down almost 4.6 cents at US$2.98 a pound.

Energy was off slightly as crude oil prices dropped on weaker U.S. demand for gasoline at the end of the summer driving season. Crescent Point Energy Corp. lost 2.3 per cent.

The October crude contract was down 14 cents at US$41.37 per barrel and the October natural gas contract was down one-tenth of a cent at nearly US$2.49 per mmBTU.

This report by The Canadian Press was first published Sept. 3, 2020.


Ross Marowits, The Canadian Press

Note to readers: This is a corrected story. An earlier version had an incorrect closing price for the Toronto Stock Exchange.

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