Toronto stocks fall as tech selloff counters BoC rate cut

By Fergal Smith

(Reuters) -Canada’s main stock index fell to a near two-week low on Wednesday as pressure on high-flying technology shares outweighed support for the market from the latest Bank of Canada interest rate cut.

The S&P/TSX composite index ended down 174.18 points, or 0.8%, at 22,639.57, extending its pullback from a record closing high last week and marking its lowest closing level since July 11.

“It’s largely profit taking … What you’ve generally been seeing over the past few weeks is those stocks that have done the best now doing the worst,” said Joseph Abramson, co-chief investment officer at Northland Wealth Management.

The S&P 500 and Nasdaq slumped to multi-week lows after Tesla and Alphabet disappointed with lackluster earnings, prompting investors to question if the Big Tech- and AI-fueled 2024 equity rally was sustainable in the long run.

The Toronto market’s technology sector was down 2.2%, while heavily weighted financials lost 0.7% and industrials ended 1.3% lower.

Canadian National Railway shares fell 3.2% after the company’s second-quarter results missed estimates.

“The moves are countertrend in nature because both monetary and fiscal policy remain supportive of accelerating growth and earnings,” Abramson said.

The Bank of Canada cut its key interest rate by 25 basis points for the second month in a row, bringing it to 4.5%, and said more reductions in borrowing costs were likely if inflation continued to cool in line with forecasts.

The utilities group, which is dominated by high-dividend paying stocks which could particularly benefit from lower interest rates, was one of just two sectors to gain ground, adding 0.6%.

Bausch Health Companies Inc was the biggest decliner, tumbling 23.1%, as the company said it was not considering a bankruptcy or insolvency proceeding of any kind.

(Reporting by Fergal Smith in Toronto and Nikhil Sharma in Bengaluru; Editing by Shreya Biswas and Aurora Ellis)