TORONTO – North American markets hit lows for the year in the wake of the Federal Reserve’s move Wednesday to increase interest rates and provide a more dovish outlook that didn’t go far enough for investors.
Markets were trading higher until the 2 p.m. announcement, after which they plunged to set new lows for the year before rising a bit but not enough to prevent the lowest closings so far in 2018.
The moves were “massive” for about an hour, said Michael Currie, vice-president and investment adviser at TD Wealth.
“It’s really almost impossible to find a reason for those types of up and down moves of 400 points (on the Dow Jones) within a very short time span,” he said in an interview.
The quarter-point rate hike was broadly expected, but investors thought the U.S. central bank would be more dovish than it was by saying it was looking for two rate hikes in 2019 instead of three. Some observers thought it would signal just one or no more hikes next year.
“So technically they toned it down, but not as much as people thought they would.”
The S&P/TSX composite index closed at a new low for the year, losing 152.83 points to 14,264.06 after hitting 14,272.38.
The decreases were widespread, led by health care and the more influential materials and financial sectors. Energy was the best performer on the day, falling just slightly on the day even though the price of oil bounced back from three days of losses.
The February crude contract was up US$1.57 at US$48.17 per barrel.
“The energy sector is keeping things from looking worse than it actually is even though it’s generally not great,” said Currie.
In New York, the Dow Jones industrial average lost 351.98 points at 23,323.66. The S&P 500 index was off by 39.20 points to 2,506.96, while the Nasdaq composite was down 147.08 points at 6,636.86.
Wednesday’s market losses marked a resumption of a negative pattern since October.
“It’s the worst December since the Great Depression, so the selling is just continuing,” said Currie, adding that time is quickly running out to end the year with a so-called Santa Claus rally.
“It just looks like people want to sell into the end of the year.”
The Canadian dollar traded at an average of 74.35 cents US compared with an average of 74.33 cents US on Monday.
Gold stocks like Barrick Gold Corp. and Yamana Gold Inc. lost 7.3 and nine per cent respectively even though the February gold contract was up US$2.80 at US$1,256.40 an ounce.
The January natural gas contract was down 11.2 cents at US$3.73 per mmBTU and the March copper contract was up 5.15 cents at US$2.72 a pound.