Wall Street’s major stock indexes closed lower on Tuesday, with the technology-heavy Nasdaq leading declines as chip stocks sold off on fears of weak demand while energy shares fell with oil prices. The TSX was also lower, but more modestly than in the U.S. which recorded gains on Monday when the Canadian market was closed for the Thanksgiving Day holiday.
U.S. earnings reports were a mixed bag with mostly positive reactions to financial services results contrasting with a more than 8% slump in shares of UnitedHealth after the health insurer forecast 2025 profit below Wall Street estimates.
Nasdaq came under particular pressure from market heavyweight Nvidia, the leading chip maker for artificial intelligence. Its shares fell 4.6% after a record-high close on Monday and a media report that the Biden administration is considering capping AI chip exports by U.S. companies.
Chip stocks lost ground broadly after results of chip-equipment-maker ASML Holdings showed downbeat expectations for 2025 sales. ASML’s U.S.-listed shares tumbled 16.2% and dragged down the Philadelphia semiconductor index .
“There seems to be a lot more stress concentrated in chips. This is putting downward pressure on technology as a sector,” said Kevin Gordon, senior investment strategist at Charles Schwab.
But while Gordon saw weaker-than-expected earnings as an excuse to sell off chip stocks, he was encouraged that there were roughly as many stocks advancing as declining on the Nasdaq.
“It’s not a broad-based washout,” he said, noting that stocks that were selling off on the day had previously outperformed. “It’s indicative of megacap stocks pulling down the indexes.”
The energy industry index was under pressure as crude prices fell on weaker demand expectations after a media report suggested Israel would not strike Iranian oil targets.
The S&P 500 fell 0.8%. The Dow Jones Industrial Average dropped 324 points, or 0.8%, and the Nasdaq composite sank 1%.
Both the Dow and the S&P 500 registered record closing highs in the previous session.
In the financial sector, Bank of America shares rose following a third-quarter profit beat, while Charles Schwab shares climbed after beating estimates. However, Citigroup shares fell after its results.
Bucking the trend of tech stock declines, Apple advanced, earlier touching a record high.
Also in individual stocks, Walgreens Boots Alliance rallied sharply after narrowly beating Wall Street’s lowered estimates for fourth-quarter adjusted profit and announcing plans to shut 1,200 stores to cut costs.
Investors will watch in coming days for the next batch of earnings as well as key economic data, including monthly retail sales and industrial production figures.
Earlier on Tuesday, San Francisco Fed President Mary Daly said that even after September’s interest-rate cut, policymakers were still working to bring down inflationary pressures.
Traders are pricing in a roughly 98% chance the Fed will cut interest rates by 25 basis points in November, according to CME’s FedWatch.
On Bay Street, the S&P/TSX Composite Index closed down 32.09 points, or 0.13%, at 24,439.08.
Canada’s annual inflation rate slowed more than expected to 1.6% in September, from 2.0% in August, pushing traders to raise their bets for a larger rate cut by the Bank of Canada at its policy meeting on Oct. 23. The bank has cut its policy rates three times this year, and markets see about a 69% chance for a hefty 50-basis-point cut, up from 47.2% earlier in the day.
Canada’s two-year and five-year bond yields were down about 5 basis points during Tuesday session. That provided support to interest rate sensitive sectors such as utilities and real estate - both of which closing with solid gains. However, the decline in the price of oil sent the heavily weighted energy sector down about 2%, dragging down the performance of the composite.
The TSX is up 16.4% for the year.
Reuters, Globe staff