TORONTO 鈥� sa国际传媒's main stock index fell more than one per cent Tuesday with losses in energy, metals and financials leading the way down, while U.S. markets fell further.聽
The S&P/TSX composite index was down 239.26 points at 20,275.54.
In New York, the Dow Jones industrial average was down 574.98 points, or 1.72 per cent, at 32,856.46.The S&P 500 index was down 62.05 points, or 1.53 per cent, at 3,986.37, while the Nasdaq composite was down 145.41 points, or 1.25 per cent, at 11,530.33.
The market reacted strongly to comments by Federal Reserve chairman Jerome Powell made in Washington as part of a two-day testimony by the central bank leader, said Kevin Headland, chief investment strategist at Manulife Investment Management.聽
Powell indicated the central bank could increase the size of its rate hikes and take rates higher than previously indicated if the data continues to show a strong economy.聽
With less optimism than investors perhaps hoped for, equity markets took a dive alongside commodities, in a day that was a far cry from January鈥檚 rally.
鈥淚t鈥檚 interesting how once again the market had expected, I think, the Federal Reserve to not maintain the same tone they have been since last year, and they鈥檝e been wrong each time,鈥� Headland said.聽
鈥淭hey continue to say they鈥檙e fighting inflation.鈥�
The markets were already pricing in two more interest rate hikes by the Fed but are now starting to price in larger hikes, said Headland, with March鈥檚 decision increasingly expected to be 50 basis points while a third hike may also be on the horizon.
This sentiment will only be further cemented if Friday鈥檚 non-farm payroll data continues to show an exceptionally strong labour market, he said.
On Friday sa国际传媒 will also get fresh labour market data, but its latest rate decision will already have passed. Wednesday鈥檚 announcement by the Bank of sa国际传媒 is widely expected to bring no change in the bank鈥檚 overnight rate.
sa国际传媒鈥檚 central bank needs to walk a finer line than the Fed, said Headland, as our economy and consumer are both more sensitive to interest rates.聽
The Canadian dollar traded for 72.90 cents UScompared with 73.45 cents US on Monday.
The Canadian dollar鈥檚 weakness Tuesday was due to U.S. dollar strength and sagging oil prices, said Headland.
With the Federal Reserve鈥檚 much more hawkish positioning than the Bank of sa国际传媒, 鈥渢he divergence between our two-year yields have widened, and that鈥檚 the downside pressure on the Canadian dollar,鈥� said Headland.聽
The April crude contract was down US$2.88 at US$77.58 per barrel and the April natural gas contract was up 12 cents at US$2.69 per mmBTU.
The April gold contract was down US$34.60 at US$1,820.0 an ounce and the May copper contract was down 11 cents at US$3.98 a pound.
This report by The Canadian Press was first published March 7, 2023.
Companies in this story: (TSX:GSPTSE, TSX:CADUSD=X)
Rosa Saba, The Canadian Press
