North American markets tumbled on Tuesday after the latest report on US inflation disappointed traders, with Canada’s main stock index dropping more than 300 points and all three major US stock indexes. All experienced their worst day since June 2020.
S&P /TSX The composite index fell 341.83 points to 19,645.40.
In New York, the Dow Jones Industrial Average fell 1,276.37 points to 31,104.97. The S&P 500 index fell 177.72 points to 3,932.69, while the Nasdaq composite fell 632.84 points to 11,633.57.
The sell-off ended a four-day winning streak for the major US stock indexes.
S&P/TSX composite closes up nearly 1.9%, US markets also rise
Bond prices also fell sharply, sending their yields higher, after the latest US Consumer Price Index report showed inflation fell to only 8.3% in August, instead of 8.1% that economists expect.
As a result, the odds are increasing that the US Federal Reserve will raise its key interest rate next week by a full percentage point, but 3/4 of a percentage point continues to be the more likely outcome. more likely, said CIBC Institutional Equity Research Executive Director Sid Mokhtari.
But if the central bank raises a full percentage point next week, the market could be in trouble.
“It was a big surprise, to be fair to you. And I think that’s where we come back to the lowest (market) we had in the summer,” he said.
“If there is a shock to the market on the downside due to that large rate hike, it could be done by the larger group of caps that have not adjusted in the same fashion as the rest of the market. the market did. summer. And it’s the larger-cap tech names in the US that are holding the S&P 500.”
However, it could be the next best buying opportunity, according to Mokhtari.
Mokhtari predicts markets will be limited for a short period of time.
“It is very important to approach this with a weight bar strategy, with utilities on one side of the ledger, and then look for risk-reward opportunities in more developed regions or regions with could be emerging, assuming there is a bottom in the market, which I believe, could start to develop as we head through September,” he said.
He noted that September was historically the weakest month in terms of stock returns.
Another potential challenge for equities ahead of the decision date for the US Federal Reserve will be what’s known as the Foursome in the financial world, taking place on Friday, September 16. On this date, the derivative products of stock index futures, stock index options, stock call options, and single stock futures contracts will expire simultaneously.
The October crude contract was down 47 cents at $87.31 a barrel and the October natural gas contract was up 3 and a half cents at $8.28/mmBTU.
The gold contract for December delivery was down $23.20 at $1,717.40 an ounce and the December contract was down 5 and a half cents at $3.56 a pound.
The Canadian dollar traded for 76.28 US cents versus 77.04 US cents on Monday.
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