Business

TSX joins global stock market sell off as coronavirus fears refuse to go away

The TSX joined stock markets around the world in a new round of selling off Monday, as surging cases of the coronavirus reignited concerns that the economic impact of the pandemic is still far from over.

Dow Jones off by almost 1,000 points, S&P/TSX Composite Index down by almost 400 points

Shares in technology companies have been doing well in the pandemic, before they started selling off in recent weeks. (Michael Nagle/Bloomberg)

The TSX joined stock markets around the world in a new round of selling off Monday, as surging cases of the coronavirus reignited concerns that the economic impact of the pandemic is still far from over.

The S&P/TSX Composite Index closed down 217 points or 1.3 per cent as health-care companies, energy companies, mining companies, banks and even tech names were all lower.

Losses began in Asia as soon as trading opened for the week, and they accelerated in Europe on worries about the possibility of tougher restrictions there to stem rising coronavirus counts.

In New York, the broad S&P 500 fell 38.41 points, or 1.2 per cent, while the Dow Jones closed down 509 points, or 1.8 per cent, after having at one point been down as much as 942 points.

Bank stocks had sharp losses Monday morning after a report alleged that several of them continue to profit from illicit dealings with criminal networks despite being previously fined for similar actions.

Tech sell off

Shares in technology companies have been on fire for the past six months, but even tech companies have been selling off of late on fears that they have risen too far, too fast.

"Anxiety has returned to the market," said Sarah Potter, president of trading website youcantrade.com, in an interview with CBC News on Monday. "You're starting to see that fallout."

A hand sanitizing station stands on the floor of the New York Stock Exchange. Investors have been trying to move past the coronavirus, but the reality of the continuing spread of the virus has prompted fears in the stock market of late. (Bloomberg)

In the early days of the pandemic, technology stocks boomed largely because their earnings were legitimately higher due to demand for their services. Online seller Amazon, streaming service Netflix and video conferencing company Zoom all boomed by catering to the needs of millions of people stuck at home because of COVID lockdowns.

Canadian technology Shopify rode that same wave to become Canada's most valuable company in this pandemic, surpassing the Royal Bank of Canada. And Montreal-based payments firm Nuvei Corp. completed the biggest technology IPO in the history of the TSX last week, raising $700 million for investors who have since doubled the value of the company.

"But now you start hearing about all these other companies who used to drive things whose earnings aren't great," she said. "The reality of these companies is bringing the market lower [and] fear is back in the market."

Oil down too

Other parts of the stock market are having a hard time picking up the slack from suddenly weak tech companies. Oil lost almost $2 a barrel to trade below $40. That's partly because the summer driving season is winding down, and there's also dwindling demand for another major use of oil: jet fuel.

"Air travel is not coming back," said Laura Lau, chief investment officer at Brompton Funds, in an interview with CBC News.

Shares in Canadian oil companies like Suncor, Baytex and Canadian Natural Resources sold off because oil is something of a proxy for the broader economy, which is having a hard time recovering from COVID-19, six months on.

"People are concerned about more shutdowns and the economy slowing down and oil is the commodity most connected to global growth," she said.

With files from the CBC's Meegan Read

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