Canada’s main stock index opened lower on Tuesday after a fall in commodity prices weighed on energy and materials stocks as demand concerns from China mounted while investors get ready to tackle higher-for-longer interest rates.
At 9:35 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was down 61.06 points, or 0.31%, at 19,739.55.
Wall Street’s main indexes fell at open on Tuesday as investors continued to grapple with the prospects of a prolonged restrictive monetary policy by the Federal Reserve and its subsequent impact on the economy.
The Dow Jones Industrial Average fell 144.20 points, or 0.42%, at the open to 33,862.68. The S&P 500 opened lower by 24.56 points, or 0.57%, at 4,312.88, while the Nasdaq Composite dropped 90.36 points, or 0.68%, to 13,180.96 at the opening bell.
Adding to investor anxiety was the likelihood of a partial shutdown of the U.S. government by Sunday, which, according to ratings agency Moody’s, is likely to be a “credit negative.”
“A polarized political environment, uncertainty on macroeconomic conditions, and then you throw a government shutdown on top of it will create a gray area where there’s no clear path,” said Chris Giamo, head of commercial banking at TD Bank.
All three major U.S. stock indexes are set to log quarterly declines for the first time this year heading into the last trading days of September.
Pressuring equities, the benchmark two- and 10-year Treasury yields have scaled multi-year highs after the Fed’s hawkish longer-term rate outlook, a stance also projected by other major central banks.
“There’s so much uncertainty in the market … interest rates at this (high) level and when will they go lower are the biggest drivers,” Giamo added.
Traders’ bets on the benchmark rate remaining unchanged in November and December stood close to 76% and 61%, respectively, according to CME’s FedWatch tool. Meanwhile, a 25-basis-point rate cut is being priced in as early as March, growing to over 33% in June and July.
A Goldman Sachs report showed hedge funds increased their bearish bets mainly on U.S. stocks last week, with clients mostly adding short positions and getting rid of long positions. Consumer discretionary, industrials and financials were the most net sold.
Investors will keep an eye out for the consumer confidence index for September and a report on new home sales for August, due after the opening bell.
Through the week, data including on durable goods, the personal consumption expenditures price index for August and second-quarter gross domestic product will be monitored for clues on inflation and the economic outlook.
Remarks by Fed policymakers such as Chair Jerome Powell will also be on investors’ watch list this week, with a handful of them already corroborating the central bank’s insistence to continue fighting against inflation above the 2% target.
Oil prices fell on Tuesday as a stronger U.S. dollar compounded concerns that demand for fuel will be held back by major central banks keeping interest rates higher for longer than expected.
Brent crude futures were down 51 cents, or 0.55%, at $92.78 a barrel, while U.S. West Texas Intermediate crude futures were trading 47 cents lower, or 0.52%, at $89.21.
Oil prices were mostly flat on Monday, after Russia softened its gasoline and diesel export ban.
“Fears of an economic recession may again dominate the oil market’s movement due to surging U.S. bond yields following the Fed’s hawkish stance last week,” said Tina Teng, a market analyst at CMC Markets in Auckland.
Reuters
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