Technology shares lost ground Thursday as a fresh rise in government bond yields weighed on growth-oriented names across North American markets.
The retreat punctured a steady run for megacap and momentum stocks and set a cautious tone ahead of key U.S. inflation data.
In Toronto, e-commerce platform Shopify fell about 4%, while electronics manufacturer Celestica dropped 3.1%. The tech pullback also dragged on the Nasdaq, with chipmakers and software names among the laggards.
When yields rise, the present value of future cash flows declines, which tends to hit richly valued technology shares first that sensitivity has intensified this year as investors try to gauge the Federal Reserve’s path after its first rate cut of 2025 and a series of mixed economic readings.
The Canadian market have already seen leadership changes create turbulence, as seen when Constellation Software shares tumbled after Mark Leonard’s resignation.
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Stronger labor market signals and stickier service prices have nudged bond yields higher this week, reviving the debate over how quickly policy makers can ease without reigniting inflation.
The downdraft in Shopify came after a powerful year to date advance that left the stock vulnerable to even modest shifts in rate expectations.
The Ottawa based company remains one of the most influential weights within the S&P/TSX Composite because of its market capitalization and index footprint that makes its day to day moves a swing factor for the broader Canadian benchmark, particularly on sessions when energy and financials trade mixed.
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Semiconductor shares weakened as traders lightened positions in some of the most widely held beneficiaries of the artificial intelligence buildout.
Software and internet platforms gave back recent gains, while more rate sensitive corners of the market, such as utilities, caught a bid as investors sought ballast. Within Canada, the technology subgroup underperformed the broader index, echoing a similar pattern on Wall Street.
Markets are bracing for the next read on U.S. inflation through the Fed’s preferred gauge, the personal consumption expenditures price index. A cooler print would likely steady bond markets and take some pressure off growth stocks.
A hotter reading could extend the recent drift higher in yields and keep the bias against long duration equities in place.
Positioning into the data looks more cautious than it was earlier this month, when optimism about faster policy easing was widespread.
Earnings season remains a secondary driver in this stretch of the calendar, but guidance updates from hardware and software makers have highlighted the same tension.
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Demand tied to AI infrastructure remains strong, yet management teams have been careful not to overextend on spending or hiring while the rate outlook is in flux that restraint supports margins near term, though it can also translate into slower top line growth if customers pause purchases.
In a market that has rewarded a small group of leaders, day to day returns can swing sharply when interest rate expectations bump around. Portfolio construction matters as much as stock selection.
Balancing high growth holdings with cash generative companies in less cyclical sectors can reduce drawdowns when yields rise.
Capital spending on data centers and cloud infrastructure remains a powerful engine for profits across the technology supply chain.
Consumer and small business adoption of digital storefronts continues to expand. Those trends do not move in a straight line, and they rarely outrun the gravity of interest rates for long.
Until the path of policy becomes clearer, technology stocks will likely trade in step with the bond market’s mood.
