Technology Stocks Take a Hit, Inflation Heats Up and Canadian Markets Find Some Strength
Week Ending October 16, 2026
Hello from Montreal!
David and I are in Montreal this week attending a conference, and while we are spending time connecting with colleagues and learning about what's happening across our industry, there has certainly been no shortage of market news to discuss.
Last week was a challenging one for investors, particularly those with exposure to technology and artificial intelligence.
We saw technology stocks pull back, inflation numbers come in higher than expected and oil prices climb to levels we haven't seen since May.
But here's where things get interesting.
While the Nasdaq had its worst week since June, the Dow Jones Industrial Average actually managed to finish higher.
And here in Canada, the TSX also posted a positive week.
So, what does that tell us?
Investors aren't necessarily abandoning the stock market. Instead, they appear to be taking a closer look at where their money is invested, how much they're willing to pay for future growth and which companies may be better positioned in the current economic environment.
Let's take a closer look at what happened.
Market Overview
Weekly Market Performance
- S&P 500: -1.95%
- Nasdaq Composite: -4.48%
- Dow Jones Industrial Average: +0.67%
- MSCI EAFE Index: +0.96%
- S&P/TSX Composite Index: +1.44%
It was certainly a mixed week.
The Nasdaq experienced the biggest decline, falling nearly 4.5% as investors sold technology and AI related stocks.
The S&P 500 also struggled, declining almost 2%.
But the Dow finished higher, suggesting investors were finding opportunities in more established businesses and sectors outside of technology.
International developed markets also managed to post gains.
And here at home, the TSX gained approximately 1.44%, finishing Friday at 36,176.55.
I think this is an important reminder that not all markets, sectors or companies move in the same direction.
It's also a good example of why diversification continues to play such an important role in our investment portfolios.
Technology Stocks Had a Difficult Week
Artificial intelligence has been one of the biggest investment stories of the past few years.
And for good reason.
Companies are investing enormous amounts of money into AI infrastructure, data centres, semiconductor technology and software.
We've seen some remarkable growth in this area, and investors have been willing to pay higher prices for companies they believe will benefit.
But last week, some of that enthusiasm cooled.
Markets started the week relatively quietly as investors waited for third quarter corporate earnings announcements.
Many of the major financial companies reported solid results, but even strong earnings weren't enough to generate much excitement.
Why?
Because expectations were already very high.
This is something we talk about quite often.
A company can be doing extremely well, growing its business and reporting strong profits, but that doesn't automatically mean its stock price will rise.
If investors were expecting even better results, the stock can still decline.
By Wednesday, selling pressure had picked up in technology and AI related companies.
That continued through Thursday and Friday, leaving the Nasdaq with its worst weekly performance since June.
I don't think this necessarily means the AI investment story is over.
Far from it.
But I do think investors are starting to ask some important questions.
How much are companies spending on AI?
How quickly will those investments generate profits?
And perhaps most importantly, are investors paying too much today for growth that may take years to materialize?
Those are reasonable questions.
AI may continue to transform businesses and industries, but that doesn't mean every company connected to AI will be a successful investment.
And it certainly doesn't mean stock prices will move higher in a straight line.
Inflation Is Back in the Spotlight
Another major story last week was inflation.
And unfortunately, the latest numbers weren't quite what investors were hoping to see.
Wednesday's U.S. Consumer Price Index report showed inflation increased to 3.7% in September, compared with economists' expectations of 3.6%.
That was up from 3.4% in August.
Then Thursday brought another disappointing report.
The Producer Price Index, which measures inflation at the wholesale level, reached 6.6% compared with a year earlier.
That was the highest reading in four years.
So why does this matter?
Because inflation and interest rates are closely connected.
The Federal Reserve has been trying to bring inflation back toward its 2% target.
When inflation remains elevated, the Fed has less flexibility to lower interest rates and may need to consider keeping borrowing costs higher for longer.
And higher interest rates affect just about everything.
Mortgages.
Business loans.
Consumer spending.
Corporate profits.
And, of course, stock market valuations.
This is particularly important for technology companies, where investors are often paying today for profits they expect well into the future.
Higher interest rates can make those future profits less valuable in today's dollars.
That helps explain why technology stocks were under so much pressure last week.
Oil Prices Are Adding Another Complication
As if inflation wasn't enough to think about, oil prices were also moving higher.
Brent crude climbed to approximately $110 per barrel on Friday, reaching its highest level since May.
Ongoing tensions in the Middle East have raised concerns about global oil supplies, pushing prices higher.
For consumers, higher oil prices can eventually mean more expensive gasoline, transportation and everyday goods.
And that creates another challenge for central banks.
Even if other parts of the economy are slowing, higher energy costs can keep inflation elevated.
Here in Canada, of course, oil prices are particularly interesting.
Higher prices can benefit Canadian energy producers and support parts of our stock market.
But they can also increase costs for households and businesses.
So once again, we have two sides to the same story.
What's good for one part of the economy isn't necessarily good for another.
What About Canada?
Canada actually had a much better week in the stock market than the United States.
The S&P/TSX Composite Index gained approximately 1.44%, closing Friday at 36,176.55.
Energy companies were among the beneficiaries of higher oil prices, with Canadian producers seeing renewed interest from investors.
Utilities and other more defensive areas of the market also provided support.
But while Canadian stocks held up reasonably well, the Canadian economy continues to face some challenges.
One of the biggest concerns right now is employment.
The latest Canadian employment report showed the economy lost approximately 68,000 jobs in September, following another difficult month in August.
The unemployment rate increased to 6.5%.
That suggests Canadian businesses are becoming more cautious about hiring and that economic growth may be slowing.
And this creates a difficult situation for the Bank of Canada.
On one hand, a weaker labour market would normally support lower interest rates.
Lower rates can help stimulate borrowing, business investment and consumer spending.
On the other hand, rising energy prices and persistent inflation make it more difficult for the Bank of Canada to provide that relief.
Bank of Canada Governor Tiff Macklem also warned last week that prolonged energy price increases could make inflation more difficult to control.
The Bank of Canada's next interest rate announcement is scheduled for October 28, so the coming economic reports will be particularly important.
We'll also receive Canada's latest inflation numbers this week.
I think the Canadian situation is worth watching closely because our economy is dealing with a different combination of challenges than the United States.
Canadian households remain sensitive to borrowing costs, particularly when it comes to mortgages and debt payments.
Businesses are also navigating trade uncertainty, slower hiring and higher operating costs.
But at the same time, Canada's stock market has meaningful exposure to energy, financials, materials and other industries that can behave quite differently from U.S. technology companies.
And that difference was certainly evident last week.
What Does This Mean for Investors?
I think last week gave us a good example of why it's important not to focus too heavily on one part of the market.
If you were only watching the Nasdaq, you might have come away thinking everything was going wrong.
Technology stocks were falling.
AI companies were under pressure.
Inflation was rising.
And investors were becoming more cautious.
But if you looked at the Dow or the Canadian stock market, you saw a very different picture.
Both finished the week higher.
That's why we spend so much time talking about diversification.
It's not about trying to predict which sector will perform best next week or next month.
It's about building portfolios that can participate in growth while managing the risks that come with investing.
There will be periods when technology leads.
There will be periods when energy, financials or more defensive companies perform better.
And there will be times when bonds play an important role in providing income and stability.
We don't need every investment to be performing well at exactly the same time.
In fact, that's part of the point of diversification.
What matters is how everything works together over the longer term.
What the Week Really Meant
If I had to summarize last week, I would say investors are becoming more selective.
For quite some time, enthusiasm around artificial intelligence has helped push technology stocks higher.
And while there are very real opportunities in this space, investors are starting to pay closer attention to valuations and profitability.
At the same time, inflation remains stubbornly above central bank targets.
Oil prices are rising.
And economic growth is sending different signals depending on which side of the border we're looking at.
That's a lot for markets to digest.
But I also think it's important to keep some perspective.
The Nasdaq fell nearly 4.5% last week.
That's certainly not a small move.
But one difficult week doesn't erase the growth we've seen over the past several years.
And it doesn't automatically mean we need to change our investment strategy.
Markets have always moved through periods of optimism, uncertainty and adjustment.
Sometimes those adjustments happen gradually.
Other times they happen rather quickly.
The important thing is making sure our financial plans aren't dependent on everything going perfectly.
They're built around your retirement.
Your income needs.
Your family.
Your goals.
And making sure your investments continue to support the life you're working toward.
That's what matters much more than trying to predict where the Nasdaq will finish next Friday.
Looking Ahead
We have another interesting week ahead.
Corporate earnings will remain a major focus, with several large technology, industrial and consumer companies scheduled to report.
After last week's selloff in AI related stocks, investors will be paying particularly close attention to what technology companies have to say about spending, demand and future profitability.
We'll also receive new economic information on housing, manufacturing and consumer sentiment in the United States.
Here in Canada, Monday's inflation report will be particularly important.
It will give us another look at how prices are changing and what that could mean for the Bank of Canada's October 28 interest rate decision.
I suspect markets will remain sensitive to any surprises in the inflation numbers.
Oil prices will also be worth watching.
If energy costs continue rising, we could see additional concerns about inflation and interest rates.
And, of course, we'll be keeping an eye on bond yields.
Higher yields can create additional pressure on stocks, while some stability in the bond market could give investors a little breathing room.
This Week: Key Economic Data
Monday, October 19
- Canadian Consumer Price Index
- Bank of Canada Business Outlook Survey and Canadian Survey of Consumer Expectations
- U.S. NAHB Housing Market Index
Tuesday, October 20
- U.S. Housing Starts
- U.S. Pending Home Sales
Thursday, October 22
- U.S. Weekly Jobless Claims
- U.S. Leading Economic Indicators
- Kansas City Federal Reserve Manufacturing Survey
Friday, October 23
- U.S. Manufacturing Purchasing Managers Index
- U.S. Services Purchasing Managers Index
- University of Michigan Consumer Sentiment Survey (Final)
This Week: Companies Reporting Earnings
Tuesday, October 20
- GE Aerospace
- Netflix
- RTX Corporation
- Intuitive Surgical
- Capital One Financial
- 3M
- General Motors
- Northrop Grumman
Wednesday, October 21
- Meta Platforms
- Tesla
- Lam Research
- Philip Morris International
- Texas Instruments
- IBM
- Abbott Laboratories
- NextEra Energy
- AT&T
- CME Group
Thursday, October 22
- Procter & Gamble
- Union Pacific
- Western Digital
- Valero Energy
- Lockheed Martin
- Newmont
- Spotify
Friday, October 23
- American Express
"Do not merely practice your art, but force your way into its secrets; it deserves that, for only art and science can exalt man to divinity."
– Ludwig van Beethoven
No matter how little or how much you use me, you change your view of me every month. What am I?
Last Week's Riddle: Simply talk about it, and you will break it. What is it?
Answer: Silence
Just a couple of Qualicum Beach locals out for a morning stroll at Beach and Second.
Footnotes And Sources
1. WSJ.com, October 16, 2026
2. Investing.com, October 16, 2026
3. CNBC.com, October 13, 2026
4. WSJ.com, October 14, 2026
5. CNBC.com, October 15, 2026
6. WSJ.com, October 16, 2026
7. WSJ.com, October 14, 2026
8. CNBC.com, October 15, 2026
9. HealthLine.com, July 21, 2026
10. Heart.org, February 19, 2025
11. CareerTrainer.ai, July 21, 2026
Investing involves risks, and investment decisions should be based on your own goals, time horizon, and tolerance for risk. The return and principal value of investments will fluctuate as market conditions change. When sold, investments may be worth more or less than their original cost.
The forecasts or forward-looking statements are based on assumptions, may not materialize, and are subject to revision without notice.
The market indexes discussed are unmanaged, and generally, considered representative of their respective markets. Index performance is not indicative of the past performance of a particular investment. Indexes do not incur management fees, costs, and expenses. Individuals cannot directly invest in unmanaged indexes. Past performance does not guarantee future results.
The Dow Jones Industrial Average is an unmanaged index that is generally considered representative of large-capitalization companies on the U.S. stock market. The Nasdaq Composite is an index of the common stocks and similar securities listed on the Nasdaq stock market and considered a broad indicator of the performance of stocks of technology and growth companies. The MSCI EAFE Index was created by Morgan Stanley Capital International (MSCI) and serves as a benchmark of the performance of major international equity markets, as represented by 21 major MSCI indexes from Europe, Australia, and Southeast Asia. The S&P 500 Composite Index is an unmanaged group of securities that are considered to be representative of the stock market in general.
U.S. Treasury Notes are guaranteed by the federal government as to the timely payment of principal and interest. However, if you sell a Treasury Note prior to maturity, it may be worth more or less than the original price paid. Fixed income investments are subject to various risks including changes in interest rates, credit quality, inflation risk, market valuations, prepayments, corporate events, tax ramifications and other factors.
International investments carry additional risks, which include differences in financial reporting standards, currency exchange rates, political risks unique to a specific country, foreign taxes and regulations, and the potential for illiquid markets. These factors may result in greater share price volatility.
Please consult your financial professional for additional information.