Canadian markets in correction territory after suffering second worst day of 2022

The S&P/TSX composite index had its second-worst day of the year by closing down 532.26 points or 2.6 per cent to 19,742.56

Canada’s main stock index moved into correction territory to start the trading week as hot U.S. inflation accelerated worries of a supercharged interest rate hike this week that could help push the U.S. economy into recession.

The S&P/TSX composite index had its second-worst day of the year by closing down 532.26 points or 2.6 per cent to 19,742.56 after falling as much as nearly 672 points in earlier trading.

U.S. stock markets suffered larger declines as the S&P 500 joined Nasdaq in bear market territory by falling more than 20 per cent from their recent highs, while the Dow Jones industrial average, like the TSX, was in correction territory with a 10 per cent drop.

In New York, the Dow lost 876.05 points to 30,516.74. The S&P 500 index was down 151.23 points to 3,749.63, while the Nasdaq decreased 530.79 points or 4.7 per cent to 10,809.23.

Markets continued Friday’s moves lower after U.S. inflation data for May showed no signs of stabilization by reaching the highest level in 40 years at 8.6 per cent, higher than what economists expected.

That’s setting up anticipation that the U.S. Federal Reserve could announce a 75 basis point rate increase on Wednesday to tackle inflation, up from earlier forecasts for a 50 point increase. A basis point is a hundredth of a per cent.

“That’s obviously causing investors to take a more cautious approach to how they’re thinking about valuations and how they’re thinking about the challenging business environment going forward,” said Ryan Crowther, portfolio manager at Franklin Templeton Canada.

There’s also more and more talk of a recessionary environment, he said in an interview.