(Toronto and New York) The Toronto Stock Exchange fell more than 600 points on Thursday, to its lowest level since April 2021, while major US indexes also fell the day after the largest interest rate hike by the United States Federal Reserve. Since 1994.
Posted at 4:13 pm.
Updated at 7:05 PM.
Despite the recovery on Wednesday, after the US central bank announced a three-quarters of a percentage point increase in its key rate, stocks slumped across the market on hopes of a drop in sweetness.
The Dow, which lost nearly 1,000 points in the session, ended 2.4% lower, falling below 30,000 points for the first time since January 2021, while the Nasdaq fell 4.1% and the broader S&P 500 fell 3.3%.
“It didn’t take long for Wall Street to lose steam since yesterday after (Fed announcements), as other major central banks also got fiercer in their fight against inflation,” Oanda’s Edward Moya explained. .
After the Federal Reserve on Wednesday, the Bank of England also raised its key interest rate on Thursday, but by only 0.25 points, as did the Swiss National Bank, the latter of which completely surprised investors.
Maris Ogg, portfolio, explained: “When people think about the impact that a simultaneous movement of all central banks ‘towards generalized tightening’ can have, they say to themselves: I still have profits to take, let’s go,” and start selling. Director, Tower Bridge Advisors.
“With the Fed’s balance sheet cut (which started in June) and markets anticipating an additional 0.75 percentage point hike at the upcoming Fed meeting,” traders are wondering “if the Fed won’t get lost,” and to advance too fast and too strong in the Monetary policy tightening, commented Quincy Crosby, of LPL Financial.
The Toronto S&P/TSX Floor Composite Index fell 607.50 points, or more than 3%, to end the session at 19,004.06 points. It is now down 24% compared to the beginning of the year.
“For me, it’s all about the Fed,” said Alan Small, an analyst at IA Private Wealth Management.
Concerns about the rising cost of loans and their detrimental effect – starting with the housing market – weigh on a range of indicators. Meanwhile, he said concerns about whether an interest rate hike by the US central bank would address problems caused, in large part, by factors largely beyond his control.
“At the end of the day, I don’t think the fact that the Fed is rising so aggressively does anything to inflation — at least not yet,” Small said. Hence the greatest pessimism about economic stability.
An surrounding gloom was fueled by a series of bad indicators, first of all the Philadelphia-area industrial activity index, which showed a contraction in June (-3.3 points), while economists waited for a rise (+4.8 points).
The first signs of a slowdown are beginning to appear, “so the question is whether this will affect the pace of inflation,” according to Maris Aug. “Because the Fed is focused on that” more than on economic growth. “And if not, it looks like they won’t stop (in raising interest rates) despite signs of declining consumer confidence” in the economy.
For Maris Ogg, the ongoing global monetary tightening, as well as the exit of some investors out of the market who wish to limit their exposure to risk, is threatening market liquidity, which could increase volatility, or even create more brutal shocks.
Case in point, the 10-year US government bond yield fluctuated by 0.26 percentage point on Thursday, a very unusual volume in a market with usually very calculated moves. It settled at 3.23% versus 3.39% the day before.
In the currency market, the Canadian dollar was trading at an average price of 77.35 US cents, up from 77.23 US cents the day before.
On the New York Mercantile Exchange, crude oil rose $2.15 to $115.24 a barrel, while natural gas rose 44 cents to 7.46 million British thermal units.
Gold jumped $30.30 to $1,849.90 an ounce and copper fell by 5 cents to $4.11 an ounce.
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