S&P/TSX Composite Index closes down more than 500 points, US stock markets fall

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TORONTO — Growing fears surrounding future economic growth weighed heavily on markets on Friday, sending Canada’s main stock index and the commodities that largely underpin it tumbled sharply, while U.S. markets also fell.

TORONTO — Growing fears surrounding future economic growth weighed heavily on markets on Friday, sending Canada’s main stock index and the commodities that largely underpin it tumbled sharply, while U.S. markets also fell.

The S&P/TSX Composite Index ended down 521.70 points, or 2.75%, at 18,480.98, in a broad-based decline led by the energy sector, while US markets were down around 1.7% as investor concerns about rising rates reached new heights.

“The Fed and other central banks have not been shy about doing this, they want to tighten policy and put it on a restrictive condition,” said Steve Locke, chief investment officer of fixed income and multi-asset strategies at Mackenzie Investments.

Friday’s cut comes after the U.S. Federal Reserve raised its key interest rate by three-quarters of a percentage point on Wednesday and warned of more to come, a move that, combined with the rate hike in Interest in other countries heightens concerns about how the rapid increases will affect the economy.

“It’s really an accumulation of monetary policy effects as central banks around the world tighten policies in the face of the wave of inflation,” Locke said.

Markets have been feeling the pressure since August, when Fed Chairman Jerome Powell signaled his determination to fight inflation after the Jackson Hole summit.

The S&P/TSX Composite Index has lost almost 1,800 points since mid-August and is now approaching the closing low reached this year on July 14 at 18,329.10.

In New York, the Dow Jones Industrial Average closed down 486.27 points, or 1.6%, at 29,590.41 to hit a new low for the year. The S&P 500 index fell 64.76 points, or 1.7%, to 3,693.23, while the Nasdaq composite fell 198.88 points, or 1.8%, to 10,867.93, both approaching their 2022 lows reached this summer.

Worries about economic growth also spilled over to commodities on Friday over the possibility of lower demand, Locke said.

“There is a greater likelihood of a faster downturn and possibly a recession to come. And when that happens, we usually see commodity prices go down a bit due to the effects that the slowdown in aggregate demand has on demand for these basic raw inputs.”

The November crude contract was down US$4.75 at US$78.74 per barrel and the November natural gas contract was down 20 cents at US$6.99 per mmBTU.

The December gold contract was down US$25.50 at US$1,655.60 an ounce and the December copper contract was down 13 cents at US$3.34 a pound.

Falling energy and metal prices sent the S&P/TSX Energy Index down 7.8%, as big names like Suncor Energy Inc. fell 9.26% and Cenovus Energy Inc. of 8.93%.

The base metals index fell 5.3%, while financials fell 1.9% and industrials 1.4%.

Rising interest rates in the US and economic fears elsewhere also gave the US dollar a strong boost.

It posted big gains against the British pound after the government proposed a hugely expensive tax cut package, while it also continues to gain against the Canadian dollar as investors worry about the magnitude of the rate hike that will affect the Canadian economy.

“Markets have started to price in that Canada’s highly interest-rate-sensitive economy might slow a bit more quickly under the pressure of these higher yields,” Locke said.

On Friday, the Canadian dollar was trading at 73.69 cents US versus 74.18 cents US on Thursday.

And while rising rates are wreaking havoc in many markets, they provide options for savers because much of the future rate hikes have been priced into fixed income rates, Locke said.

“This likely offers investors looking for a safe alternative to add to their portfolio, the potential to add higher quality fixed income securities to their portfolios, with returns they haven’t seen in over a decade. .”

This report from The Canadian Press was first published on September 23, 2022.

Companies in this story: (TSX:GSPTSE, TSX:CADUSD=X)

The Canadian Press

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