Canada’s main stock index lost almost 300 points Tuesday in a broad-based decline led by energy and base metals, while U.S. markets also slid ahead of the central bank’s upcoming interest rate decision.
After several months of relatively uninterrupted upward movement on Wall St., April has seen increased volatility as recent economic data forced investors to rethink their interest rate cut expectations, said Ilana Schonwetter, investment advisor and portfolio manager at Blueshore Financial.
“We seem to be in a time now where we are very reactive to data as it comes in,” she said, whether it’s economic data or earnings.
The S&P/TSX composite index closed down 297.08 points at 21,714.54.
In New York, the Dow Jones industrial average was down 570.17 points at 37,815.92. The S&P 500 index was down 80.48 points at 5,035.69, while the Nasdaq composite was down 325.26 points at 15,657.82.
It was the U.S. market’s worst month since September, with the S&P 500 down 1.6 per cent, the Dow down 1.5 per cent, and the Nasdaq losing two per cent.
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Yet another piece of economic data Tuesday helped spark a downward day for stocks. A new report showed that pay and benefits for U.S. workers grew more quickly in the first three months of 2024, a trend that could contribute to higher inflation.
Stronger-than-expected economic data could force the U.S. Federal Reserve to continue holding its key interest rate steady instead of starting to bring it down.
The resilience of the labour markets makes the last leg of the inflation fight more difficult, said Schonwetter.
“The strength in the labor market in the U.S. has absolutely been an issue for the Fed in acting sooner with rate cuts,” she said.
Wednesday will bring the latest interest rate decision from the Fed, which is highly unlikely to announce a cut. Investors will be listening to the language used by officials, said Schonwetter, in the hopes they will give an indication of when they plan to start cutting.
“It’s just a question of, when do they start to cut?” she said.
In Canada, the path is less murky. The latest GDP report found the economy grew 0.2 per cent in February, losing momentum after a strong start to the year.
The economic data lately supports a June start to cuts from the Bank of Canada, said Schonwetter.
In the U.S., meanwhile, even a September cut is “questionable,” she said.
As earnings continue to roll in, investors are particularly looking for companies’ guidance on the months ahead, said Schonwetter, noting the vastly different market reactions to Meta’s latest earnings report compared with Google parent Alphabet Inc. and Microsoft.
Meta’s lukewarm revenue forecast prompted a drop in its share price, while Alphabet and Microsoft saw shares rise after reporting earnings.
Amazon is also an important bellwether for how consumers are faring, added Schonwetter.
The Canadian dollar traded for 72.75 cents US compared with 73.22 cents US on Monday.
The June crude contract was down 70 cents at US$81.93 per barrel and the June natural gas contract was down four cents at US$1.99 per 1,000 cubic feet.
The June gold contract was down US$54.80 at US$2,302.90 an ounce and the July copper contract was down 12 cents at US$4.56 a pound.
— With files from The Associated Press
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