S&P/TSX composite ends down more than 200 points, US markets also down

TORONTO – Canada’s main stock index finished lower along with U.S. markets as central bank leaders stress the need for rate hikes, while oil prices and energy stocks rose on news of cuts production by OPEC more.

TORONTO – Canada’s main stock index finished lower along with U.S. markets as central bank leaders stress the need for rate hikes, while oil prices and energy stocks rose on news of cuts production by OPEC more.

Bank of Canada Governor Tiff Macklem held the line on rate hikes in a speech Thursday, saying more rate hikes are still needed to calm inflation, despite signs the market is s cooled in response to a series of aggressive central bank hikes.

Macklem’s speech came as no surprise, said Greg Taylor, chief investment officer at Purpose Investments, but whether the bank goes through with it remains to be seen.

But the bigger question is what the Fed will announce later in the quarter regarding interest rates, he said.

“The Fed made two mistakes. First they waited too long to start the hike, then when they started the hike they probably went a little too fast. And now the risk is that they’re going to break something as they try to deal with inflation,” Taylor said.

“The big debate will be whether the cure will be worse than the disease.”

The S&P/TSX Composite Index closed down 256.08 points at 18,979.01.

In New York, the Dow Jones industrial average was down 346.93 points to 29,926.94. The S&P 500 index fell 38.76 points to 3,744.52, while the Nasdaq composite fell 75.33 points to 11,073.31.

Market sentiment is still better than last week, Taylor said, but after the two-day rally to start the quarter, investors are back in wait-and-see mode.

“What are they waiting for? Right now, US payrolls data, which comes out on Friday; US inflation data, which comes out next week; and earnings season,” Taylor said.

Investors are hoping for bad news from these indicators, he said, as signs of a cooling could indicate that rate hikes are about to fade.

“There’s still a good chance we’ll get a year-end rally,” Taylor said. “We just have to get through some of these central bank meetings and results and then maybe we can put together a little relief rally.”

Taylor thinks the Bank of Canada could be among the first to deviate from quantitative tightening, after the Bank of England reversed course and Australia’s central bank slowed the pace of its hikes.

“I think central banks are starting to realize that going up too fast is likely to cause a financial crisis,” Taylor said.

The Canadian dollar was trading at 72.89 cents US against 73.31 cents US on Wednesday.

The November crude contract rose 69 cents to US$88.45 per barrel and the November natural gas contract rose 4.2 cents to US$6.97 per mmBTU.

The December gold contract was unchanged at US$1,720.80 an ounce and the December copper contract was down 5.5 cents at US$3.45 a pound.

This report from The Canadian Press was first published on October 6, 2022.

Companies in this story: (TSX:GSPTSE, TSX:CADUSD=X)

The Canadian Press