The Daily Chase: Fed could hike rates sooner than thought, Toronto home sales drop

We’re waiting to see if the tech rout extends into another day in the aftermath of yesterday’s reminder that the U.S. Federal Reserve is preparing for what could be a faster than expected tightening in monetary policy.

We’re waiting to see if the tech rout extends into another day in the aftermath of yesterday’s reminder that the U.S. Federal Reserve is preparing for what could be a faster than expected tightening in monetary policy. We learned in those minutes from the last Fed meeting that liftoff could happen “sooner or at a faster pace” than the central bankers previously anticipated. We also learned that some participants at the December meeting said the Fed’s balance sheet might have to be pared “relatively soon” after the initial rate hike. However, the minutes also noted views on balance-sheet management were “diffuse.” Investors responded by sending the Nasdaq Composite Index to its largest single-day drop since last February. Futures are pointing to a muted open and I’ve seen the 10-year U.S. Treasury yield as high as 1.742 per cent this morning.

GOOD LUCK FINDING A HOME IN TORONTO

Just like in Vancouver yesterday, today we're seeing a moderation in the country's other red-hot housing market. But it may be an involuntary moderation as tight inventory remains the story. The Toronto Regional Real Estate Board reported a nearly 16 per cent year-over-drop in December home sales. The sequential slide was even more extreme as sales fell by one-third compared to November. No surprise to see inventory dry up, with active listings plunging 59 per cent. Add it all up, and we're left with an average selling price sitting just shy of the record set in November. We’ll speak with the local real estate board’s chief market analyst shortly after 8am.

BULLISH ON BANKS

RBC Analyst Darko Mihelic is out with a report on the Canadian banks this morning, mapping out his view for why, even after the recent run-up, valuations of the big lenders are still attractive. Part of that thesis brings us back to the Fed, and the prospect of higher rates boosting the banks’ net interest margins.

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