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LIVE UPDATES Toronto flooding: Numerous road closures, thousands without power
There have been widespread reports of flooding in the Greater Toronto Area, with Environment Canada now saying that up to 125 millimetres of rain could eventually fall.
North American markets ended the trading day in the red, with a double-digit decline in Shopify Inc. weighing on the technology sector of Canada's main stock exchange and U.S. stock markets sank ahead of Wednesday's scheduled interest rate decision from the U.S. Federal Reserve.
The S&P/TSX composite index closed down 131.80 points at 18,972.68, driven by weakness in the technology sector after Shopify announced that it would be laying off 10 per cent of its workforce because it misjudged the growth of the e-commerce sector.
The company's share price fell by more than 15 per cent in late-morning trading but regained some of those losses to close at $40.69 per share.
"E-commerce is not performing as well as it was during pandemic lockdowns when people were forced to buy online," Pierre Cleroux, vice-president of research and chief economist for the Business Development Bank of Canada, said in an interview. "We all thought this would continue, but it did slow down. I was surprised by that."
In New York, the Dow Jones industrial average was down 228.50 points at 31,761.54. The S&P 500 index was down 45.79 points at 3,921.05, while the technology-heavy Nasdaq composite was down 220.10 points at 11,562.57.
Cleroux says North American markets were also reacting to the International Monetary Fund's (IMF) "gloomy" economic outlook.
The IMF now sees the global economy growing 3.2 per cent in 2022, down 0.4 percentage points from April, before slowing to a 2.9 per cent GDP rate next year, a downgrade of 0.7 percentage points.
Walmart's profit warning on Monday after markets closed also gave investors jitters. The retail giant slashed its second-quarter and full-year profit outlooks, citing skyrocketing inflation impacting consumers' shopping habits.
"Walmart is a leader. When Walmart has difficulties to meet their profit target it means other companies will have difficulties as well," said Cleroux.
The U.S. Federal Reserve is also expected to lift interest rates by 0.75 percentage points Wednesday, which Cleroux says is already baked into the markets.
It's a big week for technology earnings and Cleroux says those results will have more impact on the markets than the Fed.
"It's going to be a sign if the economy is really slowing down or not," he said.
Google parent Alphabet reported earnings that missed Wall Street estimates after the closing bell on Tuesday.
Overall, Cleroux is somewhat positive about the U.S. earnings season, however.
"Earnings will be better than what the U.S. is expecting," he said. "I think (companies) are going to meet their targets or be slightly down."
As for Canada, he says "we should perform quite well because a lot of our major companies are in the energy sector. And in the second quarter, energy prices were still very high."
The September crude contract was down US$1.72 at US$94.98 per barrel, after getting close to that US$100 per barrel mark.
"It's probably going stay between US$95 to US$100 per barrel this week," Cleroux said.
The market will expect oil demand is going to slow down as the world economy slows down, he explains, adding that he "doesn't believe the price is going to go back to $100 this summer."
The September natural gas contract was up 25 cents at US$8.83.
The August gold contract was down US$1.40 at US$1,717.70 an ounce and the September copper contract was up three cents at US$3.38 a pound.
The Canadian dollar traded for 77.62 cents US compared with 77.81 cents US on Monday.
This report by The Canadian Press was first published July 26, 2022.
There have been widespread reports of flooding in the Greater Toronto Area, with Environment Canada now saying that up to 125 millimetres of rain could eventually fall.
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