Canada’s main stock exchange jumped on Wednesday, steadying after a sell-off in the prior session.
The S&P/TSX composite index gained 325 points or 1.09% at 30,103.48
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.
At 4:00 p.m. ET (20:00 GMT), the Dow Jones Industrial Average gained 225 points, or 0.5%, the S&P 500 index traded 0.4% higher and the NASDAQ Composite rose 0.7%.
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.
3rd party Ad. Not an offer or recommendation by Investing.com. See disclosure here or remove ads. 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.
