Canada’s main stock index fell nearly 300 points on Tuesday due to broad declines led by energy and base metals, while U.S. markets also slipped ahead of the central bank’s upcoming interest rate decision.
After several months of relatively uninterrupted growth on Wall St., volatility increased in April as recent economic data prompted investors to reconsider their interest rate cut expectations, said Ilana Schonwetter, investment advisor and portfolio manager at BlueShore Financial. Have forced.
“It seems like we’re in a time now where we’re very reactive to data as it comes,” whether it’s economic data or earnings, he said.
The S&P/TSX composite index closed down 297.08 points at 21,714.54.
The Dow Jones Industrial Average in New York 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 US market’s worst month since September, with the S&P 500 falling 1.6 per cent, the Dow falling 1.5 per cent and the Nasdaq falling two per cent.
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Yet another piece of economic data on Tuesday helped lift stocks’ decline. A new report showed that wages and benefits for US workers grew more rapidly in the first three months of 2024, a trend that could contribute to higher inflation.
Stronger than expected economic data may force the US Federal Reserve to keep its key interest rate steady rather than bring it down.
The flexibility of labor markets makes the final stages of the inflation battle more difficult, Schonwetter said.
“The strength of the labor market in the US has certainly been an issue for the Fed to move sooner in terms of cutting rates,” he said.
The latest decision on interest rates will come from the Fed on Wednesday, in which the chances of announcing a cut are very low. Investors will be listening to the language used by officials, Schonwetter said, in hopes of indicating when they plan to start cutting.
“It’s just a question of when do they start cutting?” He said.
In Canada the path is less marshy. The latest GDP report found the economy grew 0.2 percent in February, losing momentum after a strong start to the year.
Schonwetter said recent economic data from the Bank of Canada supports the beginning of a rate cut in June.
Meanwhile, in the US, a cut in September is also “doubtful”, she said.
As earnings continue to rise, investors are especially looking for companies’ guidance for the coming months, Schonwetter said, noting the market was significantly more bullish on Meta’s latest earnings report than Google parent company Alphabet Inc. and Microsoft. There are different reactions.
Meta’s weak revenue forecast led to a decline in its share price, while Alphabet and Microsoft saw shares rise after reporting earnings.
Schonwetter said Amazon is also an important indicator of how consumers are positioned.
The Canadian dollar traded at 72.75 cents US, compared with 73.22 cents US on Monday.
The June crude oil contract was down 70 cents at US$81.93 a 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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