Canadian, U.S. markets fall amid ongoing rate uncertainty, mixed U.S. earnings

TORONTO –

Canada’s main stock index lost more than one per cent Wednesday amid broad-based losses led by industrials, utilities and base metals, while U.S. markets also fell.

The S&P/TSX composite index closed down 242.10 points at 19,450.70.

In New York, the Dow Jones industrial average was down 332.57 points at 33,665.08.The S&P 500 index was down 58.60 points at 4,314.60, while the Nasdaq composite was down 219.44 points at 13,314.30.

Markets continue to grapple with uncertainty over interest rate hikes and the resulting high bond yields, said Michael Currie, senior investment adviser at TD Wealth.

U.S. Treasury yields continued to put pressure on the market Wednesday.

Interest rates and stocks for months now have had a push-pull relationship that’s “almost getting to be monotonous,” said Currie: “Rates go down, stocks go up, rates go up, stocks go down.”

These movements have been indiscriminate, hitting most sectors and frustrating investors, he said.

U.S. Federal Reserve chair Jerome Powell is scheduled to speak Thursday, noted Currie, and he’s expected to reiterate that the central bank sees a need to keep interest rates higher for longer, with another hike not out of the question.

“There’s certainly no talk of rate cuts in the States,” said Currie. “At a minimum, we’re staying where we are and possibly taking it a bit higher.”

That “higher for longer” sentiment is putting a cap on equities, he said.

It was a mixed day for U.S. earnings as third-quarter reports continued to roll in. Morgan Stanley shares fell despite better-than-expected profits, while Procter & Gamble shares rose after it also beat expectations.

Meanwhile, several U.S. airlines saw their stocks drop, including United Airlines, which gave a dim outlook for the fourth quarter amid higher jet fuel prices and suspended flights to Israel.

Oil prices rose, an expected side effect of any conflict in the Middle East, said Currie.

However, the TSX’s energy index was more or less flat Wednesday despite the price of oil rising above US$87, or around two per cent.

That’s a testament to the volatility on the markets, said Currie: “It’s really moving on day-to-day as opposed to a real trend.”

The Bank of Canada and the Fed are both expected to keep rates steady at their upcoming meetings, but investors are still laser-focused on interest rates, he said.

Many investors are making moves toward bonds amid the volatility and rising yields, said Currie, and dividend stocks are being hit particularly hard by the rotation.

“A lot of individual investors (are) definitely pulling back thinking it’s not worth the risk.”

The Canadian dollar traded for 73.07 cents US compared with 73.28 cents US on Tuesday.

The December crude contract was up 18 cents US at US$85.44 per barrel and the November natural gas contract was down three cents at US$3.08 per mmBTU.

The December gold contract was up US$1.40 at US$1,935.70 an ounce and the December copper contract was down less than a penny at US$3.58 a pound.

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With files from The Associated Press

This report by The Canadian Press was first published Oct. 18, 2023.