S&P/TSX Composite Index sheds more than 600 points on Fed rate hike hangover

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North American markets faced a severe toll on Thursday after the U.S. Federal Reserve’s outsized rate hike a day earlier, with Canada’s main stock index falling more than 600 points at the close.

Major indexes fell in 2022 amid concerns about rising inflation, rising interest rates and economic downturns.

Despite a rebound on Wednesday after the Federal Reserve signaled that its 0.75 percentage point interest rate hike would not become the norm, stocks fell broadly on Thursday as hopes for a soft landing were fading.

The S&P/TSX Composite Index closed down 607.50 points or 3.1% to settle at 19,004.06, almost 24% below its position at the start of the year.

“For me, it’s all about the Federal Reserve,” said Allan Small of Allan Small Financial Group at iA Private Wealth.

Fears about the rising cost of loans and its knock-on effect — starting with the housing market — are weighing on a range of indices. Meanwhile, worries about whether the U.S. central bank’s rate hike — the biggest since 1994 — will fix problems caused by factors largely beyond its control continue to mount, he said. .

“At the end of the day, I don’t think the Fed’s raising rates so aggressively does anything for inflation — not yet,” Small said. Hence even more gloom about economic stability.

“Inflation is where it is because of a war in Ukraine, because of a labor shortage, because of China’s zero COVID policy over the past few months.”

In New York, the Dow Jones Industrial Average was down 741.46 points to 29,927.07. The S&P 500 index fell 123.22 points to 3,666.77, while the Nasdaq composite fell 453.06 points or 4.1% to 10,646.10 – down more than 30% from at its starting point of the year.

Laden with tech stocks, the Nasdaq’s decline reflects investors’ flight from companies perceived as riskier or more prone to corrections, Small said.

“You see tech stocks that just got wiped out,” he said. “I don’t know if there’s a tech name that isn’t down significantly from its highs.”

The Canadian dollar was trading at 77.35 cents US against 77.23 cents US on Wednesday.

The August crude contract rose 2.15 cents to US$115.24 per barrel and the July natural gas contract rose 44 cents to US$7.46 per mmBTU.

Gasoline prices show few signs of slowing as the average price in Canada continued to top $2.10 a liter on Thursday, nearing record highs, according to Natural Resources Canada.

“Summer is looking bleak on that side, I don’t see any relief,” Small said.

The August gold contract was up US$30.30 at US$1,849.90 an ounce and the July copper contract was down about five cents at US$4.11 a pound .

Gold, a traditional bastion of stability amid market declines and faltering economies, rose slightly on Thursday from a year earlier to $1.822 an ounce. It hit highs above $2,050 an ounce in March.

This report from The Canadian Press was first published on June 16, 2022.

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

Christopher Reynolds, The Canadian Press

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