North American markets slip again
North American stock markets fell slightly on Tuesday as they capped a rough February for investors.
The S&P/TSX Composite Index fell 38.94 points to close at 20,221.19.
New York’s Dow Jones Industrial Average fell 232.39 points to 32,656.70. The S&P 500 fell 12.09 points to 3970.15 and the Nasdaq Composite fell 11.44 points to 11455.54.
The Canadian dollar also fell, trading at 73.48 cents compared to 73.68 cents on Monday.
The market settled in the red after a day of choppy ups and downs to close out February. Despite a strong start to 2022, North American stocks have been sluggish in recent weeks, especially last week making investors tremble.
Mackenzie Investments’ Steve Locke says March could be another lion-like rally, which could lead to more volatility. The optimism at the beginning of the year that the central bank was poised to put an end to ongoing rate hikes has almost completely evaporated, he said.
“The volatility we’ve seen is definitely high and it’s due to resetting expectations,” Rock said.
“Some of the data from late January to early February was a little stronger than expected, pushing the market back on track for at least three rate hikes (by the US Federal Reserve) at the next few meetings. You can see that it is set.”
Investors have been worried for months about a possible recession following a series of rapid rate hikes by central banks last year. But despite economists predicting a likely recession this year, reports on everything from the job market to consumer spending to inflation itself have performed stronger than expected in recent weeks. .
All the better-than-expected economic data was bad news for the stock market, as it showed that central banks, especially the powerful US Federal Reserve, were not able to bring inflation under control as quickly as they would like.
It also increases the likelihood of further interest rate hikes and could plunge the economy into a full-blown recession. Corporate profits may decline and the stock market may fall.
Many now expect the Fed to raise the key overnight rate to at least 5.25% and keep it there until the end of the year, if not more.
The Federal Reserve’s interest rate is now set in the range of 4.5% to 4.75% after starting at virtually zero last year.
In the country on Tuesday, Statistics Canada said real gross domestic product was unchanged in the fourth quarter of 2022 after five straight quarters of growth.
The report shows a much tougher economy than forecasters expected as higher interest rates hit the economy even more pronouncedly.
But the data did little to shake investors’ belief that more rate hikes were coming, Rock said. In fact, rising interest rate expectations have caused yields to surge in the bond market this month.
Last year was the worst year ever for bond investors, but wise investors should now turn to the bond market, said Rock.
“I think there is an opportunity here for balanced investors to really take a look at the bond market, as the bond market has already priced in a lot of losses in 2022,” he said. “The bond market provides investors with a balance to their equity portfolios, and that is something that should really be embraced.”
April crude oil contracts rose $1.37 to $77.05 per barrel, while April natural gas contracts rose 1.5 cents to $2.75 per mmBTU.
April gold contracts rose $11.80 to $1,836.70 an ounce and May copper contracts rose 8 cents to $4.09 a pound.
This report by the Canadian Press was first published on February 28, 2023.
– With files from the Associated Press