Stock markets in Canada and the US fell after the decision of the US Federal Reserve

Canada’s main stock index ended down nearly 1% and US stock indexes closed even lower after trading with the whip after the US Federal Reserve raised its key interest rate to the next level. 3/4 percentage point and signaled many strong uptrends to come.

The rate hike was the third in a row of the same magnitude, pushing its benchmark short-term rate to a range of 3 to 3.25%, the highest since early 2008.

Officials also forecast they will continue to raise their benchmark rate to about 4.4% by the end of the year, one point above what they envisioned as recently as June.

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S&P/TSX composite ends down nearly 200 points, US stock market also slips

Wednesday’s rate hike was in line with expectations, which allowed the market to climb shortly after the announcement before plummeting as Federal Reserve Chairman Jerome Powell warned at a press conference the road to difficulty. front towel.

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“If we are to pave the way for another period of a very strong labor market, we have to push inflation back,” said Powell. “I wish there was a painless way to do it. Not available. “

At the close, the S&P/TSX composite index fell 184.15 points, or 0.95%, to 19,184.54.

In New York, the Dow Jones Industrial Average fell 522.45 points, or 1.7%, to 30,183.78. The S&P 500 index fell 66 points, or 1.7%, to 3,789.93, while the Nasdaq composite fell 204.86 points, or 1.8%, to 11,220.19.

Ryan Crowther, portfolio manager at Franklin Templeton Canada, said the reaction could be worse if the Fed raises rates more, as some have expected.

“If it hits 100, or especially above that then there’s a lot more chance of a negative reaction because it just implies they think there’s, you know, even more urgency to do that. policy implementation.”

Crowther said the decision to raise rates was made as economies around the globe, including China, Europe and the US, were showing signs of weakness, which could contribute to rate hikes. slightly lower, Crowther said, despite surprising inflation with an 8.3% gain last week.

The possibility of higher rates in the US and falling commodity prices weighed on the loonie, which was trading at 74.64 US cents versus 74.93 US cents on Tuesday.

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The Fed’s announcement also came the same day as Russian President Vladimir Putin ordered the mobilization of part of the reserve force and warned that he was not lying when he used everything at his disposal to protect Russia.

Markets are unlikely to react much to the apparent escalation of the war in Ukraine, Crowther said, but that means continued disruption going forward.

“The impact of war continues to manifest in terms of how it affects certain commodities and causes more volatility in various commodities, including natural gas and fertilizers. “.

The October natural gas contract was up 6 cents at $7.78/mmBTU, while the November crude oil contract was down $1.00 at $82.94 a barrel.

The gold contract for December delivery was up $4.60 at $1,675.70 an ounce and the December contract was down 4 cents at $3.47 a pound.

© 2022 Canadian Press

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