North American Stock Markets Shy Away From Major Moves Amid Fed Meeting


By Linda Nguyen

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TORONTO – North American stock markets were little changed Tuesday, as traders played it safe amid the latest meeting of the U.S. Federal Reserve.

In Toronto, the S&P/TSX composite index was up a modest 51.90 points to 14,550, propelled by gains in the gold and mining sectors.

It was a similarly lukewarm mood on Wall Street with the Dow Jones industrial average losing 19.31 points at 18,473.75, while the broader S&P 500 composite index gained 0.70 of a point at 2,169.18. The Nasdaq composite added 12.42 points to 5,110.05.

These marketplace movements occurred as the Fed kicked off its two-day policy meeting on Tuesday.

Economists do not expect the U.S. central bank to raise interest rates from their current level of 0.25 per cent to 0.5 per cent, but will be looking for any signals from policy-makers on whether a hike will occur later this year.

Ben Jang, a portfolio manager with Vancouver-based Nicola Wealth Management, said the likelihood that the Fed will raise rates following this meeting is pretty non-existent.

“The market is pricing at a 10 per cent chance of a hike (Wednesday). It’s really negligible,” said Jang.

“I don’t think they’ll do anything until next year.”

Even though some economic indicators have come in strong enough to support a rate hike, Jang said, he believes there are still too many uncertainties — including the upcoming U.S. presidential election in November.

The bank had initially forecasted four rate hikes in 2016, but has yet to move on any of them.

The risk, notes Jang, is that stock markets are getting used to operating in this type of environment, so when a raise does come, it has the potential to spark a sharp sell-off.

“The Fed knows that they need to hike rates but they also know they can’t do it quickly,” he said. “It’s just a matter of timing.”

In corporate news, Canadian tech company BlackBerry Ltd. (TSX:BB) announced it was releasing a new smartphone that will have the best security of all Android-powered phones on the market. Its shares gained 18 cents, or 1.93 per cent, to settle at $9.53.

WestJet Airlines (TSX:WJA) saw a 40 per cent drop in its second quarter due to the energy downturn and a rocky start to its new U.K. route. The Calgary-based company reported earnings of $36.7 million for the months of April through June, compared to $61.6 million a year earlier. Its shares fell 12 cents, or 0.52 per cent, to $22.81.

Meanwhile, the Canadian dollar was up 0.18 of a U.S. cent to 75.82 cents US, as the September crude contract faded 21 cents at US$42.92 per barrel.

In other commodities, the September natural gas was down four cents at US$2.68, while the August gold contract gained $1.30 to US$1,320.80 an ounce and September copper contracts rose one cent to US$2.23 pound.