October ended with a reminder that even the biggest companies in the world aren’t immune to a market selloff. After months of excitement surrounding artificial intelligence, investors suddenly started asking some uncomfortable questions about how much technology companies are spending and whether those investments will generate the profits everyone expects. The result was a sharp selloff across North American markets on Friday, dragging Canada’s TSX lower alongside Wall Street.
But technology wasn’t the only story. The Bank of Canada raised interest rates, Canadian economic growth showed signs of stalling, and falling gold prices weighed heavily on mining stocks. With Canada’s federal budget, American midterm elections, and major employment reports coming next week, investors have plenty to pay attention to.
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1. The Tech Selloff: Investors Are Questioning the AI Boom
Technology stocks took a beating to finish October, with Friday delivering some particularly ugly results. The Nasdaq Composite fell 2.86% on Friday, while the S&P 500 dropped 1.82%. The Nasdaq also finished October down approximately 5.2%, its worst monthly performance since March 2025. Intel was one of the biggest casualties, plunging approximately 28.6% after disappointing financial results and concerns about cash spending. Other semiconductor companies followed, with Nvidia declining 4.2% and AMD dropping 10.9% on Friday. Amazon’s earnings added to investor concerns about the enormous sums being invested in artificial intelligence infrastructure.
Here’s what I find interesting about this selloff. For the past few years, investors have rewarded technology companies for spending aggressively on AI. New data centres, powerful processors, and expensive infrastructure were viewed as necessary investments in the next major technological revolution. Now investors want to see the return on those investments.
That doesn’t mean artificial intelligence is suddenly a bad business opportunity. However, there is a difference between a technology having enormous potential and every company connected to that technology being worth its current share price. When expectations become extremely high, even reasonably good financial results can disappoint investors. I still believe AI will create substantial opportunities over the coming years. I’m simply becoming more selective about what I’m willing to pay for those opportunities.
2. The TSX Gets Caught in Wall Street’s Selloff
Canada wasn’t spared from Friday’s technology-driven decline. The S&P/TSX Composite Index finished Friday at 35,620.03, falling 629 points, or 1.74%. It was the index’s steepest daily decline since early June. Technology stocks were among the hardest hit. The TSX technology sector lost approximately 3%, with Shopify joining the broader selloff in growth-oriented companies.
Materials stocks performed even worse, declining approximately 4.8%, while Canadian financial stocks fell around 1.6%. There was one important bright spot: energy stocks rose approximately 1.7% on Friday. What makes this interesting is that the Canadian market has a very different composition from the Nasdaq. Our largest companies are concentrated in financial services, energy, materials, industrials, and other established businesses.
Yet when investors become nervous about the global economy, the selling often spreads well beyond the sector that started it. For Canadian investors, that’s a useful reminder that diversification between individual technology companies isn’t necessarily the same as diversification across the economy. If you want to see how individual Canadian stocks are performing, our Canadian Stock Heat Map is a useful place to start.
3. The Bank of Canada Raises Rates Again
One of the biggest Canadian economic developments came Wednesday, October 28, when the Bank of Canada increased its policy interest rate by 25 basis points to 2.50%. It was the central bank’s first rate increase in more than three years. The reason? Inflation remains a concern, particularly with elevated energy prices and businesses facing higher operating costs.
The Bank of Canada’s latest outlook suggests inflation could average approximately 3% in 2027 before returning toward its 2% target around the middle of 2028. For Canadians, higher interest rates can affect everything from mortgage renewals and consumer borrowing to corporate financing costs. They’re also important for investors.
Businesses carrying substantial debt may face greater pressure as financing costs rise. Companies with strong balance sheets, predictable cash flow, and pricing power may be better positioned to handle that environment. Dividend investors should also pay attention. Higher bond yields can make fixed-income investments more competitive with dividend-paying stocks, particularly when growth expectations are limited. Our comparison of five Canadian dividend ETFs provides a useful starting point for exploring diversified income investments.
4. Canada’s Economy Is Showing Signs of Weakness
Friday brought another important Canadian headline when Statistics Canada reported that real GDP was essentially unchanged in August. That marked the second consecutive month of virtually no economic growth. Even more concerning, preliminary estimates suggest the economy contracted by approximately 0.1% in September. Some industries continued to grow, including retail trade and portions of manufacturing. However, weakness in oil and gas extraction, wholesale trade, and other areas weighed on overall activity.
This creates a difficult situation for the Bank of Canada. Inflationary pressure is pushing interest rates higher, while economic growth appears to be losing momentum. Raising rates may help control inflation, but it can also put additional pressure on households and businesses. I think this is something investors should follow closely. The stock market can remain resilient during periods of slower economic growth, but consistently weak business activity eventually makes corporate earnings harder to sustain.
5. Oil Climbs While Gold Takes a Hit
Commodities provided another interesting contrast this week. Oil prices moved higher as geopolitical uncertainty and supply concerns continued to influence energy markets. U.S. crude futures finished Friday around US$104.12 per barrel, helping support Canadian energy stocks. For producers with manageable costs and strong cash flow, higher oil prices can improve profitability and support dividends.
Unfortunately, there is another side to that equation. Higher energy prices can increase transportation, manufacturing, and household costs. They can also make inflation more difficult to control, potentially keeping interest rates elevated for longer. Meanwhile, gold fell approximately 3.5% on Friday, putting pressure on Canadian mining companies.
This is why I don’t automatically assume that a weak stock market will translate into stronger gold prices. Commodity markets have their own supply, demand, currency, and investor-positioning dynamics. For Canadians holding substantial exposure to resource stocks, it’s worth remembering how quickly those dynamics can change.
My Take: This Is a Test of Expectations, Not Just Technology
I don’t think Friday’s selloff proves that the AI investment boom is finished. I do think it shows how vulnerable expensive stocks can become when investors start demanding better financial results. What matters to me is whether the underlying businesses are improving. Are revenues growing? Are profit margins sustainable? Is free cash flow improving? And can management justify the capital being spent?
Those questions matter far more over the long term than whether a stock rebounds on Monday. I’m also paying attention to the relationship between interest rates and economic growth. Canada’s latest numbers suggest that investors may have to navigate a period where borrowing costs remain elevated even as growth slows.
That’s not necessarily a reason to abandon the market. It is a reason to be thoughtful about valuation, debt, and portfolio concentration. One of the recurring lessons in our article on 10 investing habits to build wealth in Canada is that a consistent process matters more than reacting to every market headline. I think that lesson is particularly relevant right now.
What I’m Watching This Week: November 2–6, 2026
Next week could be unusually eventful for Canadian investors, with several developments capable of influencing market sentiment.
Monday, November 2 — U.S. Manufacturing Data
The latest ISM Manufacturing Index will provide another indication of how American manufacturers are handling higher costs and economic uncertainty. Weak readings could reinforce concerns about slowing demand.
Tuesday, November 3 — U.S. Midterm Elections and Job Openings
Americans head to the polls for the midterm elections, determining the balance of power in Congress. The results could influence expectations for trade, taxation, government spending, and economic policy. The U.S. JOLTS job openings report is also scheduled for Tuesday, offering another look at labour-market demand.
Wednesday, November 4 — Canadian Trade Data
Canada’s September merchandise trade figures are scheduled for release. I’ll be watching exports and imports for signs of how Canadian businesses are responding to tariffs, energy prices, and changing global demand.
Thursday, November 5 — Canada’s Federal Budget
This could be one of the biggest domestic market events of the week. The federal government is scheduled to release Budget 2026, with potential implications for infrastructure investment, tax policy, business incentives, and economic growth. Investors should pay attention to the actual measures announced rather than trading on speculation beforehand.
Friday, November 6 — Canadian and U.S. Employment Reports
Both countries are scheduled to release October employment figures. For Canada, I’ll be watching job creation, unemployment, and wage growth. The U.S. report will also be important because labour-market conditions can influence Federal Reserve expectations and global investor sentiment.
Heading Into Monday
After Friday’s steep decline, I wouldn’t be surprised to see continued volatility as investors reassess technology valuations and prepare for the week’s economic and political developments. A short-term rebound is certainly possible, particularly after such aggressive selling. But one strong trading day wouldn’t automatically mean that the concerns surrounding AI spending, inflation, and slowing growth have disappeared. I’ll be watching whether technology stocks stabilize, whether the TSX’s energy sector continues to provide support, and how financial stocks respond to changing interest-rate expectations.
For long-term Canadian investors, I think the better approach is to remain disciplined, keep an eye on fundamentals, and avoid making emotional decisions based on a single difficult trading session. Markets rarely move in a straight line, and periods like this are part of the investing journey. What about you? Are you looking at the technology selloff as an opportunity to buy, or are you becoming more cautious heading into November?
Disclaimer: This article reflects my personal opinions and research as a Canadian retail investor. It is intended for educational and informational purposes only and should not be considered personalized financial advice. Always conduct your own research and consider consulting a qualified financial professional before making investment decisions.
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On Intel’s 28.6% drop and the cash-spending worry, the call itself was blunt. CFO David Zinsner said 2026 gross capex stays on track at $20 billion and “we expect 2027 gross capital spending to be up strongly”, and when UBS asked about free cash flow he answered that it is “probably not a dynamic where we’re going to have positive free cash flow next year.” He also put the Fab 28 incident at roughly $300 million of Q4 revenue and 200 basis points of gross margin. That is your “show me the return” question in one company. The transcript: https://equibles.com/stocks/intc/calls/2026-q3
Data: Intel earnings call transcript, processed by Equibles.