TSX has worst day in three months as Fed signals big rate hike
BNN Bloomberg
The TSX slipped from early gains to post its largest daily slump in three months on fears of slowing economic growth as members of the U.S. Fed signalled that an aggressive rate hike is coming next month
Canada's main stock index slipped from early gains to post its largest daily slump in three months on fears of slowing economic growth as members of the U.S. Federal Reserve signalled that an aggressive rate hike is coming next month to tame inflation.
Craig Jerusalim, portfolio manager at CIBC Asset Management, said the day started out on a positive note because continuing U.S. unemployment claims hit their lowest level since 1969 and Tesla scored a big earnings beat Wednesday evening.
But the markets went sour after Fed chairman Jerome Powell talked about the tightness in the labour market and the need for higher rates to cool down inflation.
During a panel discussion held by the International Monetary Fund, Powell suggested that "there's something in the idea of front-loading" aggressive rate hikes."
"That led to an expectation that there's going to be a tightening of financial conditions which puts pressure on growth and valuations and essentially the market has been selling off all day since then," Jerusalim said in an interview.
On top of that, the central bank's most hawkish member, St. Louis Fed president James Bullard, has said that he's open to a 75 basis point increase at the May meeting.
