TSX down almost 100 points, U.S. markets mixed amid ongoing interest rate angst

A sign board displays the TSX level in the financial district in Toronto on Wednesday, Sept. 29, 2021. THE CANADIAN PRESS/Evan Buhler. EEB

Weakness in several sectors including financials and utilities led Canada’s main stock index down almost 100 points Tuesday, while U.S. markets were mixed after a choppy day of trading.

U.S. equity markets saw a bit of a bounceback from Monday’s fall, said Jules Boudreau, senior economist at Mackenzie Investments. But the overall mood was still negative, he said, in a continuation of recent trends.

“Markets have been a little bit stressed out over the past weeks because valuations had been getting very stretched,” said Boudreau.

“So it was to be expected that when it started to weaken at the top, we would get a few days of negative price action.”

In New York, the Dow Jones industrial average was up 63.86 points at 37,798.97. The S&P 500 index was down 10.41 points at 5,051.41, while the Nasdaq composite was down 19.77 points at 15,865.25.

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The S&P/TSX composite index closed down 97.33 points at 21,642.87.

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Recent strong economic data reports have made it increasingly clear that the U.S. Federal Reserve won’t cut interest rates as soon as many investors would like.

On Tuesday, Fed chairman Jerome Powell said the central bank is waiting to cut because it needs more confidence that inflation is sustainably heading toward its target.

“The recent data have clearly not given us greater confidence and instead indicate that it’s likely to take longer than expected to achieve that confidence,” he said.

Powell’s comments were nothing new, said Boudreau, but still sent “tremors” through the market. Treasury yields climbed immediately after the comments.

Traders are betting on just one or two interest rate cuts from the Fed in 2024, significantly down from the expectations for six that started off the year.

In Canada, meanwhile, the latest inflation data helped strengthen the case for the central bank to start cutting in June, said Boudreau.

Inflation in March ticked higher to 2.9 per cent as gas prices rose, but core inflation continued to cool.

“The inflation report we got today is in the same vein as the previous two, so a very quick declaration,” said Boudreau. Core inflation is “clearly going in the right direction,” he added.

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“I think it’s only a matter of time before they cut rates.”

The Canadian dollar traded for 72.35 cents US compared with 72.65 cents US on Monday.

The May crude oil contract was down five cents at US$85.36 per barrel and the May natural gas contract was up four cents at US$1.73 per mmBTU.

The June gold contract was up US$24.80 at US$2,407.80 an ounce and the May copper contract was down eight cents at US$4.30 a pound.

— With files from The Associated Press

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