Canadian equity futures declined on Friday morning as market participants grappled with the fallout from a massive technology-led selloff. December futures for the S&P/TSX 60 index fell 0.3% early in the trading session, following a period of intense volatility in the previous session.

Why are tech markets struggling?

The downturn stems largely from political shifts in the United States. Following a Democratic sweep in the U.S. midterm elections, investors are concerned about increased regulatory oversight regarding artificial intelligence and data centers. This uncertainty has caused significant losses in the semiconductor and chipmaking sectors, which has spilled over into Canadian markets.

Read also TSX futures rise as Democrats win U.S. Congressional control

On Thursday, the S&P/TSX Composite Index experienced its largest single-day drop in five months, falling over 2%. The technology sector was hit particularly hard, with Celestica shares plunging more than 12%. Other notable declines included:

  • Gildan Activewear, which fell nearly 19% following a quarterly earnings miss.
  • Sun Life Financial, which dropped 10.2% despite beating earnings estimates.
  • Bombardier, which saw an 8.4% decline.

What is the impact of the new Canadian budget?

Investors are also processing the second budget from Prime Minister Mark Carney. The plan intends to use windfall revenues from the oil sector to fund infrastructure and productivity initiatives over the next five years. While the government lowered its deficit forecasts through 2031, it also noted that economic growth for 2027 might be slightly lower than previously anticipated.

Additionally, the Bank of Canada recently established a new five-year monetary policy framework alongside the federal finance ministry, maintaining a 2% inflation target.

What to watch next

The immediate focus for traders is the release of Canada's latest employment report. A Reuters poll suggests the economy may have added 13,600 jobs last month, with the unemployment rate expected to remain at 6.5%. Investors will also be monitoring U.S. payroll data for indications of future Federal Reserve policy.

FAQ

Why did the TSX fall so sharply on Thursday?

The index fell due to a major selloff in U.S. technology stocks driven by fears of new AI regulations following the U.S. midterm elections.

What is the current inflation target in Canada?

The Bank of Canada has maintained its inflation target at 2% under a new five-year monetary policy framework.