Canada’s main stock index fell on Thursday, while U.S. markets were mixed amid the latest release of corporate earnings.
Angelo Kourkafas, senior investment strategist at Edward Jones, said that equity markets were experiencing some volatility following mixed reports from U.S. technology companies and geopolitical uncertainty.
In New York, the Dow Jones industrial average was up 55.96 points at 49,071.56. The S&P 500 index was down 9.02 points at 6,969.01, while the Nasdaq composite was down 172.33 points at 23,685.12.
Microsoft was the heaviest weight on the U.S. market by far, and the tech giant tumbled 10% even though it reported stronger profit and revenue for the latest quarter than analysts expected. Investors honed in instead on how much Microsoft is spending on investments, whether growth in its Azure cloud business will slow and how long its push into AI technology will take to turn into big profits.
More stocks rose within the S&P 500 than fell. Leading them was Meta Platforms, which rallied 10.4% after the company behind Facebook, Instagram and WhatsApp topped profit expectations, even though it also said it will continue its massive investments in AI.
Kourkafas said there has been some divergence among the tech giants.
“So far, the clear theme that appears to be emerging is that companies are ramping up or accelerating AI spending, and markets are rewarding those companies that can turn these investments into earnings, and that is the case with Meta,” he said.
“But companies that don’t have a clear monetization strategy, but (have) increased spending, they are facing a little bit more scrutiny.”
Tesla also weighed on the market after falling 3.5%. It delivered a bigger profit for the latest quarter than analysts expected, but the results were sharply lower than from a year earlier. Tesla’s leader, Elon Musk, has been trying to get investors to focus less on its flagging car sales and more on the company’s robotaxis and robots.
Companies across the U.S. market are under pressure to deliver at least solid growth in profits following record-setting runs for their stock prices. Stock prices tend to follow the path of corporate profits over the long term, and earnings need to rise to quiet criticism that stocks have grown too expensive.
Meanwhile, the S&P/TSX composite index was down 159.94 points at 33,016.13.
The basic materials sector led the TSX lower on Thursday after lifting the index recently to record highs.
“I think some of the moves have become parabolic, and investors might be questioning whether they’re going to be sustainable,” Kourkafas said.
The April gold contract was up US$14.60 at US$5,354.80 an ounce.
Canadian investors also digested earnings reports from Canadian Pacific Kansas City Ltd. and Rogers Communications Inc. Shares for those companies rose 5.13% and 5.69%, respectively.
“I think one of the supportive factors for stocks on the TSX is that we still expect solid earnings growth this year,” Kourkafas said.
The Canadian dollar traded for 73.99 cents US compared with 73.69 cents US on Wednesday.
The March crude oil contract was up US$2.21 at US$65.42 per barrel. Oil prices rose roughly 3.5% on worries about potentially rising tensions between the United States and Iran, which could ultimately constrict the flow of crude.
— With files from The Associated Press.