TSX Tumbles To End Notably Lower After Fed Raises Interest Rate

(RTTNews) - After opening on a firm note and holding in positive territory till a couple of hours past noon, the Canadian stock market plunged into the red after the U.S. Federal Reserve raised interest rate by 25 basis points and projected two increases for the coming year.

In Canadian economic news, the Canadian consumer price index rose 1.7% year over year in November. Economists had expected an increase of 1.8%.

Materials, healthcare and financial shares suffered losses and dragged the market down to a negative close. Energy stocks gave up most of their gains and shares from industrial space too retreated.

The benchmark S&P/TSX Composite Index closed down by 152.83 points, or 1.06%, at 14,264.06. The index, which rose to a high of 14,552.25, declined to a low of 14,256.07 later on in the session.

On Tuesday, the index closed up by 54.24 points or 0.38 percent, at 14,416.89.

The Capped Financial Index ended 1.19% down. Royal Bank of Canada (RY.TO), Toronto-Dominion Bank (TD.TO), Bank of Nova Scotia (BNS.TO) declined by 1 to 2%.

Bank of Montreal (BMO.TO) Canadian Imperial Bank of Commerce (CM.TO) and National Bank of Canada (NA.TO) ended lower by 0.5 to 0.8%.

The Capped Materials Index shed 3.7%. Barrick Gold Corporation (ABX.TO) plunged 7.3%, Franco-Nevada Corporation (FNV.TO) ended lower by 4.6%, Teck Resources (TECK.B.TO) ended 3.8% down and Agnico Eagle Mines (AEM.TO) settled lower by about 5%.

First Quantum Minerals (FM.TO) closed lower by 7.7%, Wheaton Precious Metals Corp. (WPM.TO), Goldcorp Inc. (G.TO) and Kirkland Lake Gold (KL.TO) lost 4.8 to 5.2%, and CCL Industries Inc. (CCL.B.TO) ended lower by 2.1%.

The Capped Healthcare Index ended more than 4% down. Aphria Inc. (APHA.TO), Canopy Growth Corporation (WEED.TO), Aurora Cannabis Inc. (ACB.TO) and Bausch Health Companies (BHC.TO) lost 4 to 8%.

Among energy shares, Suncor Energy Inc. (SU.TO), Canadian Natural Resources (CNQ.TO), Cenovus Energy Inc. (CVE.TO) and Husky Energy Inc. (HSE.TO) lost 1 to 2.2%.

Meanwhile, Vermilion Energy Inc. (VET.TO) soared 6.8%, Encana Corporation (ECA.TO) gained 2.1%, PrairieSky Royalty (PSK.TO) added nearly 2%, ARC Resources (ARX.TO) gained 1.6% and Tourmaline Oil Corp. (TOU.TO) advanced by 1.5%.

On Wall Street, stocks plunged after the Fed raised interest rate. The major indices declined to their lowest levels in more than a year. The Dow and the S&P 500 both ended lower by 1.5%, while the Nasdaq declined by 2.2%.

Investors, finding Fed's tone to be less dovish than expected, pressed sales at several counters in afternoon trade.

As expected, the U.S. Federal Reserve raised interest rate by 25 basis points to 2.50%. The closely watched accompanying statement noted the labor market has continued to strengthen and that economic activity has been rising at a strong rate.

Annual rates of both overall inflation and core inflation were also said to remain near the Fed's 2% target, with indicators of longer-term inflation expectations also little changed. The Fed reiterated that further gradual increases in interest rates would be consistent with the FOMC's mandate to foster maximum employment and price stability.

The central bank lowered its forecasts for real GDP growth in 2018 and 2019 to 3% and 2.3%, respectively. The Fed previously projected 3.1% growth in 2018 and 2.5% growth in 2019.

The European markets ended Wednesday's session with modest gains. Traders were in an upbeat mood after Italy's Economy Ministry announced Tuesday that an informal agreement had been made with the European Commission over its budget plan.

In economic news from Europe, the eurozone construction output dropped by 1.6% in October after rising 2.1% in the previous month, figures from Eurostat showed on Wednesday.

Data from Ifo survey showed Germany's business confidence slid to its lowest level in over two years. The Ifo Business Climate Index dropped to 101 from 102 in November. Economists had expected a score of 101.7.

Germany's producer price inflation remained at its highest level in 19 months in November, data from the Federal Statistical Office showed on Wednesday. Producer prices rose 3.3 percent year-on-year in November, same as in October. Economists had expected a 3.1 percent increase.

Meanwhile, consumer price inflation in the U.K. slowed in November to its lowest level in twenty months, rising 2.3% year-on-year and in line with economists' expectations, helped by falling petrol prices.

Asian markets ended mixed on Wednesday as investors made cautious moves, looking ahead to the U.S. Federal Reserve's monetary policy decision due later in the day. The Chinese market ended notably lower due to trade tensions.

In commodities, crude oil futures contracts for January expired at $47.20 a barrel, gaining $0.96, or 2.1%, for the session. Crude oil futures for February ended up $1.57, or 3.4%, at $48.17 a barrel. Oil prices rose despite data from Energy Information Administration showing a much less than expected drop in U.S. crude stockpiles last week.

Gold futures for February settled with a gain of $2.80, or 0.2%, at $1,256.40 an ounce, the highest settlement since 10 July 2018. However, prices drifted lower after the Fed raised interest rate by 25 basis points and projected two increases in the coming year.

Silver futures for March settled at $14.818 an ounce, up $0.117 from Tuesday's close of $14.701 an ounce.

Copper futures for March settled at $2.716 per pound, up $0.051 from previous close.