North American stock markets rise in response to Fed rate hike expectations

North American stock markets rose minutes after the last Federal Reserve meeting, indicating that the central bank will not be too hawkish in raising interest rates aggressively in the coming months.

Greg Taylor, chief investment officer at Purpose Investments, said investors were relieved that Fed members indicated about three weeks ago that it didn’t want to be overly hawkish and risk crashing the market and economy.

“So it feels like a bit of a sigh of relief, and this has brought in some money and hedging on margin shorts,” he said in an interview.

Taylor said there are concerns that the central bank may overcompensate for not raising interest rates sooner.

“The fear will be that they’re going to be very aggressive and sound 75 or so and really try to put the brakes on,” he said, referring to efforts to bring down inflation, referring to efforts to bring down inflation.

But he said everyone was comfortable with the idea of ​​a 50 basis point increase in each of the next two meetings and then reassessing the situation.

“This is something that has already been priced in the market and that is probably a good sign.”

The S&P/TSX Composite Index closed up 97.55 points at 20,383.75 points.

In New York, the Dow Jones Industrial Average rose 191.66 points at 32,120.28. The Standard & Poor’s 500 Index rose 37.25 points to 3,978.73 points, while the Nasdaq Composite Index rose 170.29 points, or 1.5 percent, to 11,434.74 points.

The US markets seem to have calmed down in the past few days from some really ugly market moves and big volatility after dropping for seven straight weeks.

Taylor said the hope is that this trend will continue into the end of the week and the start of a long weekend in the US

“Volumes are very light but it looks like they’re trying to save the month and pick up a bit at the end of the month.”

He said there had been “a few green shoots” as some of the best-selling parts on the market started to behave a bit better. Technology, which has fallen for most of the year, rebounded midweek.

In addition, bond yields dipped slightly, which was a leading indicator of the problems ahead.

In Canada, the technology sector rose 1.1 percent with Lightspeed Commerce Inc. rose 4.4 percent, and BlackBerry Ltd. By 3.1 percent, Shopify Inc. stock rose 3.1 percent. by 2.5 percent.

Healthcare advanced, jumping 2.8 percent as cannabis companies rebounded from sharp losses on Tuesday with Canopy Growth Corp rising 6.3 percent.

Energy was TSX’s second best performer, up 2 percent as crude oil prices rose and natural gas climbed to an eight-year high.

The July crude oil contract rose 56 cents to $110.33 per barrel, and the July natural gas contract rose 15.7 cents to $8.99 per million British thermal units.

Vermilion Energy Inc rose 8.9 percent while Enerplus Corp rose 6.3 percent.

“Oil is hanging around $110 and I think that’s a huge gain for all of these companies…so Canadian energy producers are up pretty much, and I think that’s just people realizing that those prices aren’t going away any time soon.”

The Canadian dollar was trading at 77.90 US cents, compared to 77.97 US cents on Tuesday.

The financial heavyweight had a good day after Scotiabank and Bank of Montreal in the second quarter began posting strong results and raising their dividends.

Scotiabank shares rose 2.9 percent, while BMO shares fell slightly.

Taylor said there was some concern after US banks reported and indicated some problems in controlling expenditures. But those concerns were allayed with the first two Canadian banks announcing results, saying they expected to keep spending growth in the low single digits.

Industries, materials, utilities, and real estate were underdeveloped today. The material lost about half a percent due to lower metal prices.

The gold contract for June was down $19.10 at $1,846.30 an ounce and the copper contract for July was down 5.1 cents at $4.25 a pound.

This report was first published by The Canadian Press on May 25, 2022.


2022-05-25 21:32:21

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