TSX rises after index slumps to near six-week low in prior session

Investing.com - Canada’s main stock exchange jumped on Wednesday, steadying after a sell-off in the prior session.

By 12,01 ET, the S&P/TSX 60 index standard futures contract had risen by 22 points, or 1.3%.

The S&P/TSX composite index gained 400 points or 1.34% at 30,177.34

On Tuesday, index slumped by 1.6% to 29,777.82 points. It was the average’s lowest closing level since September.

The Toronto-listed technology sector fell by 3.8%, weighed down by a decline in e-commerce group in Shopify, which reported margin pressure from higher research and development expenses.

A drop in gold prices also hit the materials group, including metal mining stocks, as a souring of risk appetite failed to burnish the yellow metal’s safe-haven appeal. Instead, the U.S. dollar rose to a three month high against a basket of currency peers, possibly making bullion more expensive for overseas buyers.

U.S. stocks gain

U.S. stock traded higher even as weakness in the tech sector has some investors fretted over the sustainability of sky-high stock valuations.

The Dow Jones Industrial Average gained 165 points, or 0.4%, the S&P 500 index traded 22 points, or 0.3%, higher and the NASDAQ Composite rose 115 points, or 0.5%.

The main U.S. averages slumped on Tuesday, as the broad-based S&P 500 declined 1.2%, the blue chip Dow Jones Industrial Average dropped 0.5%, and the tech-heavy NASDAQ Composite slumped 2%.

Bank CEOs stoke market bubble fears

The slide came after the CEOs of banking giants Morgan Stanley (NYSE:MS) and Goldman Sachs (NYSE:GS) sounded alarm bells over overheated valuations and speculative trading in technology shares.

Morgan Stanley boss Ted Pick said markets could face a drawdown of 10%-15%, adding that such a pullback would be a healthy normalization after months of exuberance driven by artificial-intelligence optimism.

Goldman Sachs head David Solomon echoed those concerns, warning that the surge in mega-cap tech stocks had created “bubble-like dynamics” that were unsustainable without stronger earnings support.

Their remarks stoked investor anxiety that Wall Street’s rally, powered by the “Magnificent Seven” tech giants, may be approaching a breaking point. Several of those companies have seen market capitalizations soar to record highs this year, fueling fears of excessive concentration risk.

"No one knows what the eventual catalyst will be that bursts this bubble, nor when it will happen. But history has repeatedly shown us that the odds of generating attractive real returns over the medium to long term are not on your side when you pay high valuations," said Sean Peche, Portfolio Manager at Ranmore Fund Management.

ADP data in spotlight

These warnings came as investors also faced growing uncertainty about the Fed’s next policy steps. A prolonged government shutdown has left key economic data releases unavailable, depriving policymakers and traders of crucial signals about the state of the economy.

Fed officials on Monday added to the confusion. Some policymakers suggested that the central bank could consider another cut in December if inflation continues to cool, while others argued that strong job growth and resilient demand meant policy should stay restrictive for longer.

With this in mind, today’s private jobs report for October from payrolls processor ADP will be studied carefully.

"This formerly discredited release is back in fashion, given that we have no official jobs data," said analysts at ING, in a note. "Expectations are for a modest increase at +30k after last month’s 32k fall. An on-consensus reading today ... would maintain doubts about whether the Fed cuts again in December."

AMD, Pinterest earnings in focus

The tech selloff has seen weakness in a number of names in premarket trading.

Advanced Micro Devices (AMD) (NASDAQ:AMD) stock dropped over 4% as a spike in sales and profit at the AI chipmaker was overshadowed by darkening sentiment around elevated tech valuations.

Pinterest (NYSE:PINS) sock tumbled roughly 18% after its quarterly revenue guidance fell short of expectations, stoking worries about a slowdown in digital advertising.

Of the 360 S&P 500 companies that have reported thus far, roughly 82% have beaten expectations, according to FactSet data.

Crude choppy after selloff

Oil prices were volatile after the previous session’s weakness as a large build in U.S. inventories sparked fears of sluggish demand.

Brent futures dipped 0.3% to $64.27 a barrel, having touched a near two-week low in the prior session, and U.S. West Texas Intermediate crude futures fell 0.4% to $60.35 a barrel.

Data from the American Petroleum Institute, released late Tuesday, showed U.S. oil inventories grew 6.5 million barrels in the week to November 1, blazing past expectations for a 2.4 million barrel draw.

This has sparked concerns, especially if confirmed by official data later Wednesday, over sluggish U.S. fuel demand, especially as an ongoing government shutdown disrupted air travel in large swathes of the country.

Gold bounces

Gold prices rebounded as a broader risk-off mood across global financial markets lifted bullion’s safe-haven demand, while traders await U.S. private payroll data for cues on future interest rate cuts.

Spot gold rose 0.9% to $3,965.63 per ounce by 07:46 ET, while U.S. gold futures edged up 0.4% to $3,974.87.

The metal declined nearly 2% in the previous session, hitting a one-week low.