S&P/TSX composite down, U.S. stock markets also lower after Fed cuts interest rates

TORONTO – Canada’s main stock index slipped on Wednesday, while U.S. stock markets also posted small losses after the U.S. Federal Reserve announced a highly anticipated outsized cut to its key interest rate.
The central bank cut rates by half a percentage point, saying that with inflation significantly lower, it can now turn more attention to protecting the economy and the slowing labour market.
“We’re not saying, ‘Mission accomplished’ … but I have to say, though, we’re encouraged by the progress that we have made,” said Fed chair Jerome Powell.
In New York, the Dow Jones industrial average was down 103.08 points at 41,503.10. The S&P 500 index was down 16.32 points at 5,618.26, while the Nasdaq composite was down 54.76 points at 17,573.30.
The S&P/TSX composite index closed down 85.10 points at 23,592.60.
Markets had been undecided heading into the decision whether the central bank would announce a larger cut or a quarter-percentage-point cut after weeks of concern over the health of the labour market and the possibility that the Fed had waited too long to start cutting.
“After this rate cut, the debate now shifts to not only what happens next, but how far they do intend to cut and how quickly,” said Brianne Gardner, senior wealth manager of Velocity Investment Partners at Raymond James Ltd.
When pressed at a news conference over whether the larger rate cut was an acknowledgment that the Fed had waited too long, Powell pushed back.
“We think this is timely. But I think you can take this as a sign of our commitment not to get behind.”
Markets rallied somewhat on the news midday, but dipped back into the red as the close of trading neared
“Now, I think people are reading between the lines,” said Gardner.
“That risk of a weaker economy has started to increase.”
It was the first cut by the Fed in more than four years, and comes after the central bank hiked rates to a two-decade high in a bid to quell inflation.
The central bank also released new forecasts on its key interest rate, saying it expects it will be cut by another half-percentage point by the end of the year, followed by a full-percentage point of cuts in 2025.
The Canadian dollar traded for 73.58 cents US compared with 73.55 cents US on Tuesday.
The November crude oil contract was down eight cents at US$69.88 per barreland the October natural gas contract was down four cents at US$2.28 per mmBTU.
The December gold contract was up US$6.20 at US$2,598.60 an ounce and the December copper contract was up three cents at US$4.30 a pound.
— With files from The Associated Press
This report by The Canadian Press was first published Sept. 18, 2024.
Companies in this story: (TSX:GSPTSE, TSX:CADUSD)