‘Hold on to your hats,’ investors advised after another day of tech sector turmoil

TORONTO — An up-and-down trading session ended in positive territory for Canada’s main stock index on Friday while U.S. stock markets were mixed after another day of tech sector instability.

The mayhem is what investors can expect for the next month or so as markets try to figure out if big technology players like Apple, Amazon and Zoom are worth their elevated values in a world with an ongoing pandemic and a looming U.S. presidential election, said  Allan Small, senior investment adviser at HollisWealth.

“Hold on to your hats. I think it’s going to be a bumpy ride,” he said when asked for advice for investors.

“I think the word going forward over the next week or two is, ‘Volatile.’”

A late rally allowed the S&P/TSX composite index to close in Toronto up 37.14 points at 16,222.46, although it was off by almost 70 points at midday.

Meanwhile, Wall Street closed out its worst week since June with another day of churning trading Friday.

In New York, the Dow Jones industrial average was up 131.06 points at 27,665.64.

The S&P 500 index was up 1.78 points at 3,340.97, while the Nasdaq composite, which includes many of the superstar tech stocks that have been the focus of the market’s recent selling, was down 66.05 points at 10,853.54.

The Canadian dollar traded for 75.84 cents US compared with 75.98 cents US on Thursday.

Investors are looking for signs that a major rotation into value stocks from technology is taking place, but Small said there’s no evidence of that as yet.

It seems more likely that investors are taking profits after a summer of tech stock gains and leaving the money in cash until there’s more directional clarity, he said.

The shift is somewhat seasonal, he said, agreeing that September is traditionally a weak month for markets.

But he added that September is also when children go back to school, which has sparked new fears among investors about a potential second wave of the COVID-19 pandemic outbreaks.

“I think the volatility will last, in my opinion, until we get the next catalyst to take the market higher and I really believe the next catalyst is going to come, not so much from the tech space, as from the health care space,” said Small.

He said news concerning medication testing, potential new vaccines or preventive solutions to the virus could push the market higher by boosting the outlook for sectors as diverse as banking and airlines.

The Canadian market reacted in concert with the American highs and lows on Friday, with little in the way of news to influence trading north of the border, Small said.

The biggest gains were in consumer staples, led by two grocery retailers who posted big quarterly gains as more Canadians cooked at home because of the novel coronavirus.

Empire Co. Ltd., which owns the Sobeys and Safeway grocery chains, shares rose $2.39 or 6.7 per cent to $37.89 after it reported Thursday a 50 per cent jump in first-quarter profit on sales that climbed by nine per cent.

Shares in The North West Company Inc., which owns retail chains including Giant Tiger, rose $2.30 or 8.04 per cent to $30.91 after it reported Friday second quarter sales increased 23 per cent and net earnings tripled.

Canada’s tech sector fell, led lower by Lightspeed POS Inc., which fell $1.82 or 4.35 per cent to $40.05 in Toronto on its first day of trading on the New York Stock Exchange.

Energy and materials sectors shares were little changed.

The October crude contract was up three cents at US$37.33 per barrel and the December gold contract was down US$16.40 at US$1,947.90 an ounce

The October natural gas contract was down 5.4 cents at US$2.27 per mmBTU and the December copper contract was up four cents at US$3.04 a pound.

This report by The Canadian Press was first published Sept. 11, 2020.

Companies in this story: (TSX:EMP.A, TSX:NWC, TSX:LSPD, TSX:GSPTSE, TSX:CADUSD=X)

The Canadian Press