Wall Street slid on Friday to its deepest daily loss since 2020, as Amazon slumped following a gloomy quarterly report and fresh data showing the biggest surge in U.S. monthly inflation since 2005 spooked investors already worried about rising interest rates.
The TSX was also lower, and although losses were less severe, it capped a month in which the Canadian market saw its biggest decline since March 2020, when stocks were in freefall at the start of the coronavirus pandemic.
Downbeat results and worries about aggressive monetary policy tightening by the Federal Reserve have hammered megacap technology and growth stocks this month.
On Friday, Amazon.com Inc tumbled 14.05% in its steepest one-day drop since 2006, leaving the widely held stock near two-year lows. Late on Thursday, the e-commerce giant delivered a disappointing quarter and outlook, swamped by higher costs.
Apple Inc, the world’s most valuable company, dropped 3.66% after its disappointing outlook overshadowed record quarterly profit and sales.
The Fed is set to meet next week, with traders betting on a 50-basis-point rate hike to combat surging inflation.
Ahead of the weekend and the Fed meeting next week, “people are clearing the decks. The disappointing guidance from Apple and Amazon and a few other companies set the stage for today to be weak and it accelerated as we ended out the day,” said Peter Tuz, President of Chase Investment Counsel in Charlottesville, Virginia.
The Nasdaq has lost about 13% in April, its worst monthly performance since the global financial crisis in 2008.
The S&P 500 has fallen 13% so far in 2022, its steepest four-month decline to start any year since 1932.
Adding to fears on Wall Street, data showed the personal consumption expenditures price index - the Fed’s favoured measure of inflation - shot up 0.9% in March after climbing 0.5% in February.
Signs of aggressive monetary policy tightening, the Ukraine war and China’s COVID lockdowns have fueled fears of an economic slowdown. Data on Thursday showed the U.S. economy unexpectedly contracted in the first quarter.
Canadian investors are also bracing for aggressive interest rate hikes by this country’s central bank. The economy most likely grew by an annualized 5.6% in the first quarter, official data showed Friday, reinforcing the likelihood of another half-percentage-point interest rate hike by the Bank of Canada in June.
The S&P/TSX Composite Index on Friday ended down 359.06 points, or 1.7%, at 20,762.00, bringing its losses in April to 5.2%.
“Canadian equities aren’t immune to what is happening across North America but the resource exposure is clearly making the net impact a little bit more palatable for domestic investors,” commented Shailesh Kshatriya, director, investment strategies at Russell Investments.
The TSX has fallen 2.2% in 2022. The Toronto market has been helped by a 47.6% gain for the energy group and a 13.9% advance for materials, which are both heavily weighted.
All 10 of the Toronto market’s major sectors ended lower on Friday. It included a 2.8% decline for industrials, while technology lost 2.5%.
Heavily weighted financials fell 1.3%, while consumer discretionary shares ended 1.8% lower, weighed by a 3.1% decline for Magna International Inc after the auto parts maker lowered its annual profit forecast.
In the U.S., all 11 S&P 500 sector indexes fell, led lower by a 5.9% slide in Consumer Discretionary and a 4.9% drop in Real Estate.
The S&P 500 logged it largest one-day decline since June 2020, falling 3.63% to 4,131.93 points. The Nasdaq’s decline was its largest since September 2020.
The Nasdaq declined 4.17% to 12,334.64 points, while Dow Jones Industrial Average declined 2.77% to 32,977.21 points.
For the week, the S&P 500 lost 3.3%, the Nasdaq shed 3.9% and the Dow declined 2.5%.
The first-quarter U.S. earnings season overall has been better than expected so far. Nearly half of the S&P 500 companies have reported through Thursday and 81% of them have topped Wall Street’s expectations. Typically, only 66% beat estimates, according to Refinitiv data.
Next week, earnings will be a major focus in Canada, with many large-cap stocks - including Shopify and Thomson Reuters - reporting results.
Canadian and U.S. government bond yields were modestly higher across the curve Friday. The Canada 10-year climbed 5.2 basis points to 2.839%, but held below the 11-year high notched last week at 2.944%.
Reuters, Globe staff
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