North American stock markets were largely flat Wednesday as investors took a breather in advance of Friday's meeting of the U.S. Federal Reserve in Jackson Hole, Wyo.
The S&P/TSX composite index was up 36.03 points at 20,021.38.
In New York, the Dow Jones industrial average was up 59.64 points at 32,969.23. The S&P 500 index was up 12.04 points at 4,140.77, while the Nasdaq composite was up 50.23 points at 12,431.53.
Wednesday’s lack of momentum shows financial markets are waiting for the Jackson Hole conference to see if Fed Chair Jerome Powell makes any comments that might indicate what the U.S. central bank plans to do with respect to inflation and future interest rate hikes, said Vincent Tonietto, SVP and portfolio manager with Fiduciary Trust Canada.
"No one wants to take very large bets ahead of Jerome Powell’s speech on Friday," said Tonietto. "There won’t be a lot to digest until then, so until we have more data, it’s probably more of a wait-and-see approach for everyone."
Investors are hoping Powell will signal that the U.S. Fed is close to the end of its rate-hiking cycle, and that it believes it can get inflation back under control without aggressive measures that could harm the economy. Most traders believe the U.S. Central Bank will announce either a 50 or a 75-basis point interest rate hike in September (a basis point is a hundredth of a percentage point).
Recessionary fears among investors are still high, Tonietto said, in spite of a solid six-week rally this summer that helped equities markets regain much of the losses suffered during June’s bear market.
Tonietto pointed out that yield curves remain inverted, a potential warning sign for the economy and financial markets. He added any comments Powell makes Friday will likely serve as a “recalibration point” for markets.
"That will probably be a moment where you’ll see how crowded the bear versus bull side is at that point," he said.
The Canadian dollar traded for 77.02 cents US compared with 77.09 cents US on Tuesday.
The October crude contract was up $1.15 at US$94.89 per barrel and the October natural gas contract was up 15 cents at US$9.30 per mmBTU.
The December gold contract was up 30 cents at US$1,761.50 an ounce and the September copper contract was down five cents at US$3.64 a pound.
In Canada, the financials sector took a hit for the second day in a row due to weaker-than-expected quarterly earnings from the country's largest bank. On Wednesday, one day after Scotiabank's earnings pulled down bank stocks, RBC reported its third-quarter profit declined from a year ago due to a significant pullback in capital markets as well as the deteriorating economic outlook that higher borrowing costs have triggered.
RBC’s stock price closed down $3.29, or 2.60 per cent, to $123.20 on Wednesday, while the S&P/TSX financial subindex was down 1.23 per cent by the end of the day.
"If the path of (future) interest rate hikes is higher than what the markets were expecting, that could affect the profitability of the banks," Tonietto said. "And so I guess with the (earnings) news we’re seeing today and the unknowns of (Powell's) speech on Friday, investors are being a little bit more cautious."
The health care index was the day’s top performer, up 4.36 per cent on the day largely driven by a significant rally by cannabis stocks. Canopy Growth Corp.'s share price increased more than 13 per cent to $5.03 on Wednesday, while Aurora Cannabis Inc. was up almost 10 per cent at $2.02 per share.
This report by The Canadian Press was first published Aug. 24, 2022.
Companies in this story: (TSX:GSPTSE, TSX:CADUSD=X)
Amanda Stephenson, The Canadian Press
