TSX, U.S. markets down as tech stocks tumble

Canada’s main stock index fell more than 90 points Tuesday, dragged down by losses in the tech sector as U.S. markets also declined.

The S&P/TSX composite index was down 90.87 points at 19578.30. The biggest losses were in the technology sector, which was down 4.08 per cent by the end of trading, as well as the health-care sector, which lost 7.92 per cent on Tuesday.

In New York, markets also fell as disappointing earnings reports weighed on technology and travel companies. The Dow Jones industrial average was down 58.13 points at 32774.41. The S&P 500 index was down 17.59 points at 4122.47, while the Nasdaq composite was down 150.53 points at 12493.93.

Investors are jittery about the new U.S. Consumer Price Index data report, which is expected to be released today and will show how much inflation rose in the U.S. for the month of July, said Pierre Cléroux, chief economist for the Business Development Bank of Canada.

“There’s a lot of worry about that,” Cléroux said. “I think that’s the reason the market has lost its momentum … this worry about inflation is slowing down the market.”

While investors are hoping for a core inflation reading showing that inflation in the U.S. has already peaked, Cléroux said he thinks that’s unlikely.

“I think inflation numbers are going to be high,” he said. “I think it’s going to take a bit more time before inflation goes down.”

This week’s U.S. inflation data will be coming on the heels of a surprisingly hot U.S. jobs report released last week. While Canada actually lost 31,000 jobs in July, the U.S. added 528,000 jobs in the month, more than double the 250,000 economists had expected.

The rapid pace of job growth south of the border is the reason a majority of analysts now expect the U.S. Federal Reserve will announce a 75-basis-point interest rate increase in September.

Fears that central banks will trigger a significant recession is one reason why riskier growth stocks such as tech are taking a hit.

But while recession is a scary word, Cléroux said, he’s not anticipating a large one. He said that while interest rate hikes will slow down growth, that’s necessary in the face of clear signs of an overheated economy.

Energy stocks gained slightly on Tuesday as the price of oil continued to hover around the $90 US mark, after dipping slightly last week. Cléroux said he expects the price of oil to remain elevated due to several years of underinvestment in the energy sector and growing global population growth.

And while higher prices for gasoline and home heating might be tough on consumers, they also provide a significant lift to Canada’s GDP.

“This is actually good for Canada, because we produce a lot of [oil],” Cléroux said. “Twenty per cent of everything we export is related to oil, so when the oil price is at $90 US, this is good for the Canadian economy.”

The Canadian dollar traded for 77.64 cents US compared with

77.78 cents US on Monday.

The September crude contract was down 26 cents at $90.50 US per barrel, and the September natural gas contract was up 24 cents at $7.83 US.

The December gold contract was up $7.10 US at $1812.30 US an ounce, and the September copper contract was down less than one cent at $3.59 US a pound.

Notable stock movements by Canadian companies on Tuesday included Recipe Unlimited Corp., which shot up more than 45 per cent on news that controlling shareholder Fairfax Financial Holdings Ltd. has proposed taking the company private in a deal that values the restaurant chain at $1.2 billion.