TORONTO — Canada's main stock index fell more than 250 points in a broad-based decline Wednesday, while U.S. stock markets also fell.
The S&P/TSX composite index closed down 253.07 points at 20,695.02.
In New York, the Dow Jones industrial average was down 94.45 points at 37,266.67. The S&P 500 index was down 26.77 points at 4,739.21, while the Nasdaq composite was down 88.72 points at 14,855.62.
The latest data on U.S. retail sales released Wednesday showed sales were stronger in December than economists expected.
Bond yields climbed after the report, putting downward pressure on equities, as investors trimmed bets for the U.S. Federal Reserve to start cutting its overnight rate in March.
“The expectations have come down for the first round of rate cuts, because the economic data ... showed that December was pretty good,” said Jennifer Tozser, senior wealth adviser and portfolio manager with Tozser Wealth Management at National Bank Financial Wealth Management.
Investors continue to be focused on when central banks in Canada and the U.S. will start cutting rates — and by how much, said Tozser.
Interest rates will be “the No. 1 catalyst for the entire stock market in 2024,” said Tozser.
The Fed has signalled it expects to cut three times in 2024, but the market has been betting it will cut more than that.
Fed governor Christopher Waller said on Tuesday that the central bank is looking for more evidence that inflation is on track to hit its two per cent target before it pulls out the scissors.
Canada’s economy has softened much more dramatically under the weight of rate hikes than the U.S. economy has, said Tozser, largely due to differences in their mortgage markets — Canadian mortgage terms are significantly shorter, meaning homeowners are renewing their mortgages at higher rates at a much faster pace.
Canada’s economy is teetering on the brink of a technical recession, while the U.S. economy is still chugging along.
But nonetheless, the Bank of Canada doesn’t seem like it’s eyeing rate cuts earlier than the Fed, said Tozser — something she views as a mistake.
“We’re in a completely different situation than the Americans,” she said.
The Canadian dollar traded for 73.95 cents US compared with 74.17 cents US on Tuesday.
The March crude contract was down four cents at US$72.48 per barreland the February natural gas contract was down three cents at US$2.87 per mmBTU.
The February gold contract was down US$23.70 at US$2,006.50 an ounce and the March copper contract was down three cents at US$3.73 a pound.
— With files from The Associated Press
This report by The Canadian Press was first published Jan. 17, 2024.
Companies in this story: (TSX:GSPTSE, TSX:CADUSD)
Rosa Saba, The Canadian Press
